On Wednesday, Citi revised its stock price target for VF Corp (NYSE:VFC), a leading apparel and footwear company, reducing it to $13.00 from the previous $16.00, while maintaining a Neutral rating on the stock. The adjustment follows the anticipation of the company's fourth-quarter sales and earnings per share (EPS) to align roughly with the consensus estimates.
Analysts at Citi project a slight underperformance, with an EPS expectation of $0.02 compared to the consensus of $0.03, based on an estimated revenue decline of 10.7%, which is slightly better than the consensus forecast of an 11.4% decrease.
The company, which did not provide specific guidance for the quarter, has indicated ongoing efforts to address excess inventory in its Vans brand. This surplus is expected to impact Vans' sales and margins in the fourth quarter. Citi analysts believe that the brand's inventory cleanup will not yield immediate positive results. Consequently, they do not anticipate VF Corp to issue EPS guidance for the fiscal year 2025.
Despite these challenges, Citi suggests that the current low stock price could present a favorable risk-reward balance, with potential upside from positive developments such as asset sales or debt repayment.
Still, the firm cautions investors by noting the stock's history of declines following the previous two earnings announcements, with a 10% drop in the third quarter and a 14% fall in the second quarter, although both instances occurred when the stock price was higher.
Investors and market watchers are keeping a close eye on VF Corp as it navigates inventory management and seeks to stabilize its financial performance in the face of these recent challenges.
InvestingPro Insights
As VF Corp (NYSE:VFC) confronts inventory management issues and financial performance stabilization, recent data from InvestingPro provides a deeper look into the company’s situation. With a market capitalization of $5 billion, VF Corp's valuation suggests a strong free cash flow yield, according to an InvestingPro Tip. This could be a silver lining for investors looking for value in the company's stock.
In terms of financial health, the company's revenue for the last twelve months as of Q3 2024 was reported at $10.82 billion, with a gross profit margin of 52.27%, reflecting the company's ability to maintain profitability at the gross level.
Yet, the revenue growth has declined by 7.5% over the same period, indicating challenges in sales expansion. Despite this, analysts are optimistic, with another InvestingPro Tip highlighting an anticipation of sales growth in the current year.
Investors should also consider the company's dividend track record, as VF Corp has maintained dividend payments for 54 consecutive years, offering a dividend yield of 2.8%. This could be attractive for income-focused investors, especially in the context of the stock's price decline of over 24% in the last three months.
For those interested in further analysis, InvestingPro offers additional tips, including predictions of profitability and insights into stock price volatility. To access these insights, investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 8 more tips available on InvestingPro, there is a wealth of information for those looking to make an informed decision on VF Corp.
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