Citi has reaffirmed its positive stance on VF Corp (NYSE: NYSE:VFC), maintaining a Buy rating and a $20.00 price target for the company's shares.
The firm's analysis suggests that VF Corp's second-quarter sales and earnings per share (EPS) may fall below the broader market consensus. Citi's projections are set at $0.35 for EPS, compared to a consensus of $0.39, with an anticipated revenue decline of 7.6%.
The forecast is based on the company's guidance, which indicated a modest improvement from the 10% revenue decline seen in the first quarter, contrary to the consensus estimate of a 5.8% decrease.
Citi's position comes despite not expecting significant progress in the performance of Vans, one of VF Corp's major brands. Management has tempered expectations, predicting only a slight sequential improvement in the current quarter.
Nonetheless, the stock has seen a significant increase, rising 30% since the first-quarter report, which has led to heightened expectations among investors and a potentially challenging environment leading into the company's earnings call.
The analyst notes that the management team, led by CEO Bracken Darrell, is likely to express optimism at the upcoming Investor Event scheduled for October 30. The decision to host this event is seen as a positive indication of the company's readiness to engage with investors and share its vision for the future.
In other recent news, VF Corp has made significant strides in its financial strategy, highlighted by the completion of the sale of its Supreme brand for $1.5 billion. This strategic move has enabled the company to pay down debt and focus on revitalizing its core brands.
Despite the divestiture, VF Corp has maintained its Q2 outlook, forecasting a modest revenue decline, a slight increase in gross margin, and a minor rise in SG&A expenses. The company has also announced additional cost savings of $50 million in Q1 of fiscal year 2025.
Analyst firms have provided mixed views on these developments. Stifel has raised its stock price target for VF Corp to $25, reinstating a Buy rating due to anticipated upside potential. However, Wells Fargo has downgraded VF Corp from Equal Weight to Underweight, citing concerns about the company's current valuation. Barclays upgraded VF Corp to Overweight from Equal-weight, increasing its price target to $22, while Jefferies initiated coverage with a hold rating and a $20 target price.
JPMorgan maintains a Neutral stance on VF Corp, holding steady its price target at $16.00. The firm's analysis suggests that VF Corp's earnings per share (EPS) for fiscal years 2025 through 2027 will fall short of the consensus estimates on Wall Street.
Furthermore, the firm expects VF Corp to experience a revenue growth of +3% in FY26 and FY27, slightly less than the Street's forecast of +4%. JPMorgan has placed VF Corp on a Negative Catalyst Watch ahead of the company's second-quarter fiscal 2025 earnings, anticipating potential downside to consensus revenue and EPS estimates for the quarter and the full fiscal year.
InvestingPro Insights
Adding to Citi's analysis, recent data from InvestingPro provides further context to VF Corp's current position. The company's market capitalization stands at $7.63 billion, reflecting its significant presence in the apparel industry. Despite Citi's cautious revenue projections, InvestingPro data shows that VF Corp has maintained a strong gross profit margin of 51.9% over the last twelve months, indicating resilience in its core business operations.
InvestingPro Tips highlight that VF Corp has maintained dividend payments for an impressive 54 consecutive years, underscoring its commitment to shareholder returns even in challenging times. This aligns with the company's high shareholder yield, another positive signal for investors. However, it's worth noting that analysts anticipate a sales decline in the current year, which corroborates Citi's conservative outlook.
The stock's recent performance has been notable, with InvestingPro data showing a strong 20.27% return over the last three months and an even more impressive 54.58% return over the past six months. This upward momentum supports Citi's observation of heightened investor expectations leading into the earnings call.
For investors seeking a more comprehensive analysis, InvestingPro offers additional insights with 8 more tips available for VF Corp, providing a deeper understanding of the company's financial health and market position.
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