V.F. Corporation (NYSE:VFC) is slated to release third-quarter fiscal 2019 results on Jan 18, before the opening bell.
This designer, manufacturer, and marketer of branded apparel and related products outpaced earnings estimates in three of the trailing four quarters, with the average surprise being 11%.
The Zacks Consensus Estimate for the quarter to be reported is pegged at $1.09 per share, which depicts an improvement of 7.9% year over year. Estimates have been stable lately, ahead of the company’s earnings release. Moreover, the consensus mark for revenues stands at $3.9 billion, reflecting a year-over-year increase of 6%.
Factors at Play
V.F. Corp has been smoothly progressing with its 2021 growth strategy, which focuses on responding to the changing marketplace and maximizing shareholder returns. Moreover, the company’s robust direct-to-consumer and digital businesses, as well as international segment have been significantly boosting its performance. It is also gaining from strength in Active and Work segments. These factors are likely to drive the company’s top and bottom-line results in the to-be-reported quarter.
In the last reported quarter, V.F. Corp’s three big brands improved at a combined rate of 11%, led by 26% growth at Vans and 7% improvement at The North Face, excluding currency. Driven by robust quarterly performance and increased visibility for the second half, management raised its earnings and sales view for fiscal 2019. These are likely to drive the performance of the to-be-reported quarter as well.
Furthermore, the company is on track with the spin-off of jeans business, which is subject to final approval by its board and customary approvals, in addition to tax and legal considerations. The spin-off is expected to conclude by the first half of 2019. Following the completion of the spin-off, the companies are expected to gain from lesser managerial and operational activities, better management focus, as well as flexible capital and operational structure.
Despite these positives, we remain wary of the company’s wholesale business that remains soft. Moving to a more digital-driven business, V.F. Corp is slowly eliminating sales to middlemen — including department stores and off-price retailers — that are exposed to risks of bankruptcy and store closures. This has been hurting revenue contribution from the wholesale business.
Although the company is establishing tie-ups with digital wholesale partners like Amazon (NASDAQ:AMZN) and Zalando to sell The North Face brand for improving performance, we expect brick-and-mortar wholesale in the United States to remain challenged.
Additionally, V.F. Corp’s international business, which constitutes major part of sales, remains exposed to currency fluctuations. These factors might hurt results in the to-be-reported quarter.
A Look at the Zacks Model
Our proven model does not conclusively show that V.F. Corp is likely to beat earnings estimates in the quarter to be reported. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although the company has a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.
Stocks Poised to Beat Earnings Estimates
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat in their respective quarterly results:
PVH Corp. (NYSE:PVH) has an Earnings ESP of +4.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Snap-on Incorporated (NYSE:SNA) has an Earnings ESP of +0.20% and a Zacks Rank #3.
Ralph Lauren Corporation (NYSE:RL) has an Earnings ESP of +0.78% and a Zacks Rank #3.
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