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Will Currency Woes Weigh Upon V.F. Corp's (VFC) Q2 Earnings?

V.F. Corporation VFC is slated to release second-quarter 2017 results on Jul 24. The question lingering in investors’ minds is whether this designer, manufacturer and marketer of branded apparel and related products will be able to deliver a positive earnings surprise in the quarter to be reported. The company posted in-line earnings in the last two quarters. Let’s see how things are shaping up prior to this announcement.

V.F. Corporation Price and EPS Surprise

V.F. Corporation Price and EPS Surprise | V.F. Corporation Quote

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 28 cents, reflecting year-over-year decline of over 20%. We noted that our earnings estimate has remained stable over the last 30 days. Further, analysts polled by Zacks expect revenues of $2.3 billion, down about 6.4% from the year-ago quarter.

V.F. Corp. forms part of the Retail – Wholesale sector. Per the latest Earnings Trends as of Jul 15, the Retail – Wholesale sector’s earnings are expected to inch up 0.1%, with 3.8% revenues growth.

Factors at Play

V.F. Corp.’s shares have gained 10.1% in the last six months, outperforming the Zacks categorized Textile – Apparel industry’s decline of 2.2%. This could be largely attributable to its five-year strategic growth plan (2021 growth strategy) that was announced this March. The plan focuses on rapidly responding to the changing marketplace as well as targeting shareholder returns. Further, the company’s four-point strategy focuses on redesigning portfolio and empowering its key brands, adopting a consumer and retail-centric model, enriching direct-to-consumer and digital businesses, and directing investment to Asia, particularly China. Well, these plans underscore the company’s growth prospects. In fact, we believe that the company is progressing well on these lines, as revenues in the first quarter mainly gained strength from international and direct-to-customer platforms, along with the Outdoor & Action Sports coalition.

However, both earnings and sales declined year over year, as a challenging retail environment and currency headwinds played foul. Currency has long been a hurdle for the company’s top line which has suffered four consecutive quarters of year-over-year decline. Also, adverse currency fluctuations are expected to persist and hurt results. Evidently, management expects foreign currency woes to hurt 2017 revenues by about two percentage points. Also, the gross and operating margins are likely to bear respective 70 and 60 bps negative impacts from currency, in 2017. Finally, the company expects earnings per share to decline at a low-single digit percentage rate on a year-over-year basis, whereas the same is likely to rise in the mid-single digit rate on a currency neutral basis.

Considering the pros and cons, we prefer to wait and see if V.F. Corp.’s growth strategies can help it sail through these headwinds this earnings season.

What the Zacks Model Unveils?

Our proven model does not conclusively show that V.F. Corp. is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

V.F. Corp. currently carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, the company has an Earnings ESP of 0.00% as both, the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 28 cents. The combination of V.F. Corp.’s Zacks Rank #2 and ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Dollar General Corporation DG has an Earnings ESP of +0.94% and a Zacks Rank #2.  You can see the complete list of today’s Zacks #1 Rank stocks here., Inc. AMZN has an Earnings ESP of +13.77% and a Zacks Rank #3.

Nordstrom, Inc. JWN has an Earnings ESP of +4.92% and a Zacks Rank #3.

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