Shareholders of VF Corp (NYSE: VFC) stock are having a very bad day.
The apparel company behind such iconic brands as Vans shoes, Timberland boots, and North Face jackets announced its fiscal third-quarter 2020 earnings this morning. Sales of $3.4 billion narrowly missed analyst expectations of $3.43 billion in sales, while “adjusted” earnings of $1.23 per share edged out analyst predictions of only $1.21. Now, VF stock is down an even 10% as of 1:30 p.m. EST.
Image source: Getty Images.
Despite “missing estimates,” VF Corp’s sales were still up 5% year over year, led by Vans sales up 12% and, especially, revenue coming out of China up 30%. On the other hand, its “outdoor” segment sales rose only 3% year over year.
Improvements in operating profit margins helped lift operating profits 11%. Rising expenses, however, dragged the company’s net profit back down, with the result that GAAP net income did not rise at all for VF — it earned $1.16 per diluted share a year ago, and $1.16 per share again in Q3 2020.
To wit, management warned that although its sales are expected to continue rising at a 5% rate for the full year, and earnings from continuing operations are still expected to grow even more strongly (up 15%), the end result will be only $3.30 per share in profit. That sounds good at first, but because VF had previously predicted that its earnings would range from $3.32 per share to $3.37 per share (16% to 18% growth), investors are interpreting the new guidance as a warning of an impending earnings “miss” in the fourth quarter. Taken in conjunction with today‘s miss, that would be back-to-back disappointments — pretty bad news.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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