V.F. Crop (VFC) is a Zacks Rank #5 (Strong Sell) that designs, manufactures and markets branded apparel and related products. The company operates under three segments which include Outdoor, Active and Work. Outdoor offers brands such as North Face, Timberland and Smartwool. Active offers Vans, Jansport, Eastpak and Eagle Creek. And Work offers Dickies, Walls, Kodiak and Horace Small.
The rally that never came.
Looking at the last three months, most stocks we see out there have a V-shaped chart. These stocks basically saw a move lower in March, bounced to February levels, and then some even kept going higher.
For VFC, there was very little love off the March lows. Yes, there was a 50% move off the $45 level. However, the stock has since been sold and is struggling to gain traction. Moreover, the stock remains almost 30% off of February levels.
Most traders will look at that chart and think “something is wrong here” so let’s look into the numbers and figure that out.
Earnings and Estimates
Back in May, the company reported a 1 cent miss on EPS, missed on revenues and suspended its share buyback program. VFC also guided Q1 Rev down to more than 50% year over year.
While the pandemic has been an issue, the company started seeing problems earlier in the year, with a 10% drop in the stock after earnings were reported in January.
Whether the pandemic or structural problems are to be blamed doesn’t matter at the moment. What does matter is the aggressive drop in estimates over the last 90 days.
For the next quarter, analysts have taken estimates lower by 63%, from $1.36 to $0.51. For the current year, we have seen an even bigger drop of 66%.
VFC recently made highs over the $70, but sellers quickly stepped in. The failure to reach the 200-day moving average about 10% higher from those highs signals weakness. The stock has held above the 21-day and 50-day at $59, but a break of that area would be troublesome.
The stock is starting to form an upwards channel, but should be monitored for a break lower if price gets below $56.
Investors will likely be wasting their time sitting in VFC. If the company is one of interest, look for the estimates to turn around and a move above the 200-day before buying the stock.
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