On Tuesday, Jefferies has updated its outlook on VF Corp (NYSE:VFC), increasing the price target to $21 from the previous $20, while maintaining a Hold rating on the company's shares. The adjustment follows VF Corp's second quarter performance, which exceeded expectations. This development was somewhat unexpected, given the management's prior commentary, the first quarter's trends, and mixed alternative data.
The company has also decided to reinstate its guidance, although it will be provided on a quarterly basis for the time being. The guidance for the third quarter suggests that revenue could reach a breakeven constant currency (CC) and that operating margin percentage (OM%) may decline compared to the previous quarter. The analyst views this outlook as potentially conservative.
The report acknowledges that while there is still progress to be made, there are signs of effective execution and a conservative approach. This, along with easier comparables from previous periods and deleveraging efforts, supports the narrative that VF Corp is on the path to a turnaround.
The updated guidance and recent performance appear to have enhanced the credibility of the management team ahead of the investor day scheduled for Wednesday.
The analyst's commentary highlights the company's improved management credibility, noting that the positive results and the reinstatement of guidance contribute to a more convincing story of recovery. This change in perspective comes as the company prepares to share more detailed information with investors mid-week.
In other recent news, VF Corp has seen significant developments in its financial performance and strategic moves.
The company reported earnings per share (EPS) of $0.60 for the second quarter of fiscal year 2025, surpassing the consensus estimate of $0.38. Despite a challenging market, VF Corp's revenues decreased by 6%, better than the anticipated 7% decline. This led Evercore ISI to raise VF Corp's price target to $22 from $16, maintaining an In Line rating.
In addition, VF Corp completed the sale of its Supreme brand for $1.5 billion, a strategic move that allowed it to pay down debt and focus on core brands. The company also announced additional cost savings of $50 million in Q1 of fiscal year 2025.
Analysts from various firms have provided mixed views on these developments. Stifel reinstated a Buy rating with a raised price target of $25, while TD Cowen and JPMorgan maintained their Hold and Neutral ratings respectively.
However, Williams Trading and Wells Fargo maintained a Sell and Underweight rating respectively, due to concerns about the company's debt and current valuation. Citi also maintained a Buy rating on VF Corp, despite projections of second-quarter sales and earnings per share falling below market consensus.
These are the recent developments shaping VF Corp's trajectory.
InvestingPro Insights
Recent data from InvestingPro adds depth to the analysis of VF Corp's current position and future prospects. The company's market capitalization stands at $6.63 billion, reflecting its significant presence in the apparel industry. Despite the positive outlook from Jefferies, VF Corp faces some challenges, as indicated by its negative P/E ratio of -5.71, suggesting recent profitability issues.
InvestingPro Tips highlight that VF Corp has maintained dividend payments for an impressive 54 consecutive years, demonstrating a commitment to shareholder returns even in challenging times. This aligns with the company's efforts to rebuild investor confidence, as mentioned in the article. Additionally, analysts predict that VF Corp will return to profitability this year, supporting the turnaround narrative discussed by Jefferies.
The company's revenue for the last twelve months was $10.28 billion, with a revenue growth decline of 10.16%. This data contextualizes the management's decision to provide quarterly guidance and their potentially conservative outlook for the third quarter.
It's worth noting that VF Corp's stock has experienced a large price uptick over the last six months, with a total return of 33.68%. This positive momentum could be attributed to the improving execution and deleveraging efforts mentioned in the analyst report.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 10 more tips available for VF Corp on the platform.
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