On Monday, V.F. Corp (NYSE:VFC) stock, was added to JPMorgan (NYSE:JPM)'s Negative Catalyst Watch List. The firm revised its expectations for the company's future earnings, citing several headwinds affecting its brands.
JPMorgan has adjusted its forecast for V.F. Corp's fiscal year 2025 earnings per share (EPS) to $1.02, which is significantly lower than the consensus estimate of $1.34. The firm also expects a 4.8% revenue decline for the same period, contrasting with the Street's projection of flat revenue.
Additionally, JPMorgan predicts operating margins of 7.0%, which is below the consensus of 7.8%. For fiscal year 2026, the EPS estimate has been set at $1.61, compared to the Street's expectation of $1.78, with a projected revenue growth of 4%, which is slightly below the Street's 5% forecast.
The firm anticipates that V.F. Corp will face a negative earnings revision for the fourth quarter of the fiscal year 2024, ahead of the company's earnings report. JPMorgan's model suggests that incentive compensation will fully negate the benefits of any cost savings.
The adjusted EPS for the fourth quarter is expected to be a loss of $0.07, in contrast to the Street's prediction of a $0.02 profit. This is based on an estimated 15% decline in revenues, which is more than the Street's forecast of an 11% drop, and a gross margin expansion of 160 basis points to 51.2%, which is higher than the 50.4% anticipated by the Street.
The firm's analysis points to persistent wholesale revenue challenges in both North America and Europe, particularly within the Outdoor Channel, affecting The North Face's performance in the Americas. Additionally, there is an expectation of a similar revenue impact in the fourth quarter for Vans, as was seen in the third quarter, due to efforts to reset the brand.
Timberland continues to face difficulties within the wholesale sector, with a focus on diversifying its product range beyond its core boot silhouettes. Dickies' Americas work business is also not showing signs of improvement, with value-conscious consumer discretionary headwinds and assortment challenges after an excessive pivot towards lifestyle offerings.
InvestingPro Insights
In light of JPMorgan's recent analysis and projections for V.F. Corp, InvestingPro data and tips provide additional context for investors. The market capitalization of V.F. Corp stands at $5.35 billion, reflecting the scale of the business amidst market conditions. Despite the recent negative outlook, analysts expect net income to grow and sales to increase in the current year, which could signal potential for a turnaround. However, the stock has experienced significant volatility, with price movements indicating a bearish trend as it trades near its 52-week low.
InvestingPro Tips suggest that while the stock has suffered in the short term, there is anticipation for profitability in the upcoming year. Moreover, V.F. Corp has a strong history of maintaining dividend payments, with 54 consecutive years of dividends, currently yielding 2.62%. The valuation implies a strong free cash flow yield, which could be a positive sign for value investors. For a deeper analysis and additional insights, investors can explore more tips on InvestingPro, where there are 19 more analysts' earnings revisions and other metrics available. Be sure to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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