Stifel Upgrades VF Corp, Sees Attractive Entry Point in Apparel Stock

VF Corp. shares may be a good buy after the company's recent dividend cut, according to Stifel Nicolaus.

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VF Corp. shares are up to a buy from a hold rating by analyst Jim Duffy after investors sold off the stock following a dividend cut, saying the stock now appears compelling. According to the note, Vans has been growing its dividends for 49 years, which is one of the reasons it is often included in exchange-traded funds as a dividend aristocrat, as it has been growing its dividend for 49 years.

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“It is our recommendation that you capitalize on the elevated volume in the market in order to build positions as a result of the dividend cut and resulting dislocation in the shares. It is our opinion that the new look 4.6% dividend yield is likely to be safe (mid-50%) and we expect a flush of cash flow (forecast of $2-2.5 billion for the next 5 quarters, more than 20% yield to equity) to accrue to its value in the next couple of years," Duffy wrote.

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It was reiterated by the analyst that he expects the shares to rise about 15% from Thursday's close in the coming 12 months. In premarket trading on Friday, shares of VF added 1.8% to their price.

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During the last three calendar years, the stock price of the company has declined. In 2022, it fell by 60%, in 2021, it fell by 12%, and in 2020, it fell by more than 11%. The trend has continued this year, with shares falling more than 5% in 2023, and it is expected to continue next year as well.

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Although VF beat expectations on both the top and bottom lines in its fiscal third-quarter earnings report published this week, according to FactSet's consensus estimates, VF's performance was slightly weaker than expected.

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“Considering the deleverage resulting from the deleveraging, the dividend yield, and the potential earnings boost from fundamental improvements (baseline FY25E EPS = $3.00), a reverting to a mid-teens P/E implies an opportunity for a 75%+ upside within 12 months,” Duffy wrote.

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“Despite the fact that visibility to fundamental inflection is a challenge, we have a positive outlook on the brand portfolio, operational competencies, and organizational culture of the company. At these levels, we see the risk-reward ratio as being favorable,” he added.