VF Corporation Beats 2Q15 Estimates after Three Straight Misses

VF Corporation’s 2Q15 financial results

VF Corporation (VFC) released its 2Q15 earnings on July 24. The quarter ended June 30, 2015. The company’s earnings performance was strong. Adjusted earnings per share (or EPS) grew 11% year-over-year in reported terms and 22% in constant currency terms, to $0.40 in the quarter. Revenue grew 4.7% in reported terms and ~10% in constant currency terms to ~$2.5 billion.

VFC beats Wall Street

In 2Q15, VFC came in ahead of consensus Wall Street analyst estimates on both earnings and revenue after three quarters of misses. Revenue beat estimates of ~$2.4 billion. Wall Street had projected an adjusted EPS of $0.36.

EPS upside

VFC’s 2Q15 EPS was partially lifted by a lower effective tax rate in the quarter. This positively impacted EPS by $0.02. Income tax expense fell 24% to ~$32 million in 2Q15. Performance for some of its major segments was strong. You’ll read more on these key growth drivers for VFC in the next article.

US dollar impact

A stronger US dollar had a huge impact on VFC’s revenue and earnings. In 2Q15, 34% of VFC’s sales stemmed from markets outside the United States, compared to 36% in 2Q14.

In comparison, Nike (NKE) derived ~55% of its sales outside the United States in fiscal 2015. The company reported that revenue growth for 4Q15, which ended May 31, 2015, came in at ~13% in constant currency terms and ~4.8% in reported terms. Under Armour (UA), another VFC peer, reported a ~2% negative impact on sales due to the stronger dollar. UA derived ~11% of its sales from international markets in 2Q15.

A key reason for VFC’s high vulnerability to the appreciating dollar is its relatively greater exposure to Europe and the euro. Nike, on the other hand, has significant exposure to Western Europe, Eastern Europe, Russia, and Japan, regions with currencies that saw sharp falls in value versus the US dollar.

NKE, VFC, and UA together constitute ~4.6% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY) and ~0.6% of the holdings of the Vanguard S&P 500 ETF (VOO).