On Thursday, Jefferies initiated coverage on apparel and footwear giant VF Corp. (NYSE:VFC) with a Hold rating and established a price target of $20.00 per share. The firm outlined that VF Corp., known for brands like Vans, The North Face, and Timberland, is on a promising trajectory thanks to new management strategies, product and marketing revamps, and cost-cutting measures. These efforts are expected to lead to profitable growth.
The analyst noted that near-term (NT) sales for VF Corp. should see an upturn due to easier comparisons from previous quarters, while a deleveraged balance sheet (B/S) is anticipated to support earnings per share (EPS) growth that surpasses that of its competitors. Despite the positive direction, the analyst cautioned that the medium-term (MT) recovery might not be smooth and that current visibility into the company's performance is still limited.
VF Corp.'s valuation was also a point of discussion. Reflecting on the period when the Vans brand was trending pre-COVID and experienced double-digit percentage growth, VF Corp. had a price-to-earnings (P/E) ratio ranging from 15 to 23 times. The current 20 times P/E ratio is seen as indicative of the progress VF Corp. has made, albeit amidst ongoing uncertainties.
The coverage initiation comes as investors look to gauge the potential of VF Corp. in the face of a changing retail landscape and consumer trends. The Hold rating suggests a neutral stance, implying that the firm sees the stock as fairly valued at the current levels given the mix of positive developments and existing challenges.
InvestingPro Insights
In light of Jefferies' recent coverage on VF Corp. (NYSE:VFC), a deeper dive into the company's financial metrics and analyst expectations provides additional context for investors. According to real-time data from InvestingPro, VF Corp. currently holds a market capitalization of $7.45 billion. Despite facing a challenging retail environment, the company has managed to maintain dividend payments for an impressive 54 consecutive years, underscoring its commitment to shareholder returns. This is further evidenced by a high shareholder yield, which is a positive sign for investors looking for income.
However, it's important to note that analysts have revised their earnings downwards for the upcoming period, reflecting some caution about the company's near-term performance. Additionally, they anticipate a sales decline in the current year. These revisions could impact the stock's future trajectory, despite a strong return over the last three months, with a 31.45% price total return. Investors should also be aware that VF Corp. is trading at a high Price/Book multiple of 5.4, which might suggest the stock is valued optimistically relative to its book value.
For those considering an investment in VF Corp., there are over nine additional InvestingPro Tips available, which provide a comprehensive analysis of the company's financial health and market position. These insights could be crucial in making an informed decision, especially in the context of the company's expected profitability this year and the recent large price uptick over the last six months.
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