On Monday, Stifel, a financial services firm, increased its stock price target for VF Corp (NYSE:VFC) to $25.00, up from the previous target of $21.00, while reiterating a Buy rating on the stock. The firm's analyst highlighted a positive outlook for the company, anticipating a strong potential for an upside surprise and a re-rating of the shares starting in the third fiscal quarter.
VF Corp, known for its apparel brands including Vans and The North Face, is expected to present a mixed assessment of its fundamental health in its second fiscal quarter (FY2Q) report, due on October 28. Although The North Face brand may exhibit sequential deceleration in the FY2Q, there is potential for a sharp reacceleration in the third fiscal quarter (FY3Q).
The analyst noted several positive indicators for VF Corp, including an anticipated directional improvement in the Vans brand, a positive turn in gross margin after ten consecutive quarters of year-over-year declines, and discussions on additional cost-saving opportunities. The company might also provide more forward-looking guidance.
The report is expected to demonstrate steps toward stabilization, with the second half of the fiscal year (FY2H) and fiscal year 2026 (FY26) presenting significant opportunities for margin improvement. Stifel's projections remain well above the consensus for these periods, suggesting a strong confidence in the company's performance.
The analyst concluded that with improving fundamentals, better visibility, progress in de-risking the balance sheet, and the potential for estimates to be exceeded, VF Corp's shares are likely to be re-rated higher as the company moves into 2025.
In other recent news, VF Corp has seen significant developments. The company recently concluded the sale of its Supreme brand for $1.5 billion, a strategic move that has allowed the company to pay down debt and refocus on revitalizing its core brands.
Wells Fargo has downgraded VF Corp from Equal Weight to Underweight, expressing concerns about the company's current valuation and overly optimistic market expectations for profit margins. Goldman Sachs, however, has reinstated a Neutral rating for VF Corp, anticipating a potential resurgence of the Vans brand.
Analyst firms have offered mixed views on these developments. Barclays has upgraded VF Corp to Overweight from Equal-weight, increasing its price target to $22, while Jefferies initiated coverage on VF Corp with a hold rating and a $20 target price. On the contrary, BMO Capital maintained its Market Perform rating with a steady price target of $14, and Williams Trading reiterated its sell rating with a steady price target of $10.
Despite these changes, 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. These are among the recent developments shaping VF Corp's trajectory.
InvestingPro Insights
Recent data from InvestingPro adds depth to Stifel's optimistic outlook on VF Corp (NYSE:VFC). The company's stock has shown remarkable strength, with a 48.62% price total return over the past three months and an impressive 69.87% return over six months. This aligns with Stifel's expectation of a potential re-rating of the shares.
InvestingPro Tips highlight that VF Corp has maintained dividend payments for 54 consecutive years, demonstrating a commitment to shareholder returns despite recent challenges. This consistency could be appealing to income-focused investors. Moreover, analysts predict the company will return to profitability this year, supporting Stifel's view of improving fundamentals and potential upside surprises.
However, investors should note that VF Corp's revenue growth was -10.16% in the last twelve months, reflecting the challenges the company has faced. This context underscores the importance of the anticipated turnaround, particularly in brands like Vans and The North Face, as mentioned in Stifel's analysis.
For readers seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for VF Corp, providing a broader perspective on the company's financial health and market position.
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