VF Corp (VFC, Financial) witnessed a significant stock movement as its shares jumped 23.58%, driven by better-than-expected second-quarter earnings results. The company's strategic cost-cutting measures have propelled revenue and earnings beyond analyst projections.
In the second quarter, VF Corp reported a revenue decline of 6% to $2.76 billion. This was an improvement from a 10% decline in the first quarter and surpassed the forecasted $2.7 billion. The core brands such as Vans, The North Face, Timberland, and Dickies faced sales declines, but the overall performance showed sequential improvement. Furthermore, VF Corp completed the sale of Supreme to EssilorLuxottica for $1.5 billion, which was used to pay down a $1 billion term loan due in December 2024.
The company's gross margin improved by 120 basis points to 52.2%, while inventories decreased by 13%. However, the adjusted operating margin declined by 60 basis points to 11.4%, and adjusted earnings per share fell slightly from $0.63 to $0.60, still exceeding the estimated $0.37.
Looking ahead, VF Corp's guidance suggests stabilization, projecting revenue between $2.7 billion and $2.75 billion, representing a decline of 1%-3% from the previous year. The adjusted operating income is expected to range between $170 million and $200 million.
From a valuation perspective, VFC's current price is $21.045, and the market capitalization stands at $8,190.36 million. Despite a price change of 4.02%, the stock's GF Value is currently estimated at $22.3, suggesting it is fairly valued. More details about its valuation can be seen on GF Value.
Despite the positive earnings, VF Corp faces several warning signs. The Altman Z-Score indicates financial distress with a score of 1.06, implying a potential bankruptcy risk in the next two years. Additionally, the Piotroski F-Score is low at 3, signaling poor business operations, while the dividend payout ratio of 1.91 is considered too high. The company's revenue per share and gross margin have been declining over the past 12 months.
On a positive note, the Beneish M-Score of -3.26 suggests that VF Corp is unlikely to be a manipulator. Insider buying activity has been observed with 15,000 shares purchased over the past three months, indicating potential confidence in the company's future.
Investors should closely monitor VF Corp's upcoming earnings report, expected on October 30, 2024, to gain further insight into the company's performance and strategic direction.
