On Monday, JPMorgan reiterated its Neutral stance on VF Corp (NYSE:VFC), 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.
JPMorgan projects FY25 EPS at $0.30, which is below the Street's expectation of $0.48. For FY26, the EPS is forecasted at $0.65, compared to the Street's $1.01, and for FY27, the EPS is anticipated to be $1.08, under the Street's $1.29 prediction.
The firm expects VF Corp to experience a revenue growth of +3% in FY26 and FY27, which is slightly less than the Street's forecast of +4%. Additionally, the forecast includes an annual EBIT margin expansion of +140 basis points for the same period, compared to the Street's expectation of +160 basis points. By FY27, JPMorgan anticipates an EBIT margin of 6.1% for VF Corp, which is lower than the Street's projection of 7.1%.
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. The $16 price target for December 2025 is based on a 15 times multiple of the firm's calendar year 2026 EPS estimate, which aligns with the average of VF Corp's global brand peers.
The firm's linear regression analysis suggests a fundamental fair value of $12 per share based on an 11 times price-to-earnings (P/E) multiple, assuming a 4% top-line growth and a 6.1% operating margin by FY27. In contrast, applying a 20 times P/E multiple, which is VF Corp's pre-pandemic five-year average, to the FY26 model yields a $21 equity value.
This is despite consensus estimates for FY25 EPS being approximately 80% below the level of a year ago, while the company's shares have increased by 32% over the same period, in line with the S&P 500's performance.
In other recent news, VF Corp, a renowned apparel company, has seen significant developments. The company has concluded the sale of its Supreme brand for $1.5 billion, a strategic move that has enabled it to pay down debt and refocus on its core brands. VF Corp's financial strategy has been influenced by this sale, which has been seen as a crucial step in revitalizing its core brands.
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.
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.
InvestingPro Insights
Recent data from InvestingPro provides additional context to JPMorgan's analysis of VF Corp (NYSE:VFC). The company's market capitalization stands at $7.63 billion, reflecting its current position in the market. InvestingPro Tips highlight that VFC has maintained dividend payments for an impressive 54 consecutive years, demonstrating a long-standing commitment to shareholder returns despite recent challenges.
However, aligning with JPMorgan's cautious outlook, InvestingPro data shows that VFC's revenue growth in the last twelve months as of Q1 2023 was -10.16%, with a quarterly decline of -8.58%. This supports JPMorgan's projection of lower growth rates compared to Street estimates. The company's operating income margin of 5.43% also corroborates JPMorgan's forecast of a 6.1% EBIT margin by FY27, which is indeed lower than the Street's expectations.
Interestingly, while JPMorgan maintains a Neutral stance, an InvestingPro Tip notes that VFC has shown a strong return over the last three months, with price total return data indicating a 20.27% increase over three months and a substantial 54.58% over six months. This recent stock performance, coupled with analysts' predictions that the company will return to profitability this year, suggests a complex picture that investors should consider carefully.
For readers seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for VFC, providing a deeper understanding of the company's financial health and market position.
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