Apparel maker VF Corp.
(NYSE:VFC) is setting the stage for long-term growth with strong fundamentals,
brand equity and new investments.
The company's fourth quarter
earnings quadrupled from last year and adjusted earnings of $2.32 a share
topped street view by a penny. Total revenues for the quarter grew 37 percent
to $2.91 billion, while consensus estimate was $2.89 billion, according to
analysts polled by Thomson Reuters.
VF's fourth quarter results
were benefited by the $2.3 billion acquisition of Timberland Company (TBL) in
2011. The acquisition added Timberland and Smartwool brands to VF, which own
brands such as Wrangler and Lee.
For 2012, the company sees
adjusted earnings of approximately $9.30 a share and revenue growth of about 15
percent. Analysts expect earnings of $9.51 a share on revenue of $11.22
billion.
Shares of VF touched a new
52-week high as the investors kept aside the below consensus outlook and seems
to be thinking the outlook as conservative, given the strong fundamentals of
the company.
"We believe VFC's initial 12
guidance for $9.30 in EPS is among the most conservative in the sector. We
believe guidance (and Consensus) will begin to rise as the TBL integration
accelerates & order visibility for the fall/winter season improves in coming
months," UBS analyst Michael Binetti wrote in a note to clients.
In addition, the company has
increased brand investments significantly over the past 2-yrs, which set a
stage for the long-term growth.
"We believe a recent track
record for strong returns on new investments and a big 2012 capex increase is
the right move for the long-term health of the business," Binetti said.
Analysts have been saying
that VF's evolution toward a greater mix of revenues from
high-growth/high-margin brands, international markets, and owned retail would
drive valuation higher. Over that time, VF has continued to invest in
brands and assets that increased the rate of long-term growth.
"With the integration of TBL
and ongoing investments in the core business, we believe VFC can deliver 15%
EPS growth through 2014 (CAGR) which can support a higher 15x target P/E,"
Binetti said.