UPDATE: KeyBanc Upgrades VF Corp. (VFC) to Buy

(Updated - September 19, 2014 7:45 AM EDT)

KeyBanc upgraded VF Corp. (NYSE: VFC) from Hold to Buy with a price target of $80.00. The change follows its analyst day. Analyst Edward Yruma also touched on the possibility that VFC would acquire lululemon athletica (NASDAQ: LULU).

Yruma said, "We think the most noteworthy takeaway from the Timberland/VFC analyst day is not about Timberland per se – despite an impressive roadmap to $3.1 billion in revenue in 2019 (+13% five-year CAGR) – but rather that V.F. Corporation (VFCNYSE) has a systematic process to make good brands great."

"We came away impressed with VFC’s ability to use consumer insight and mate it with strategic focus and tactical execution to help Timberland find its voice. This process and skill set differentiates VFC from its peers and should allow it to make even larger acquisitions. This, in tandem with our framework favoring brands, cause us to upgrade VFC to BUY with an $80 price target. We are raising our 2015 EPS estimate to $3.56 from $3.46, our target price reflects 22.5x 2015E EPS. This compares to 18.8x 2015E EPS on its current stock price and 24.3x 2015 P/E for our brand peer group. Our upwardly revised 2015 EPS estimate is driven by our now more constructive view on Timberland," he added.

Regarding lululemon athletica Yruma said, "We continue to believe that an acquisition of LULU would be ideal. We think the product quality, forecasting and store operations challenges that LULU has faced are actually strengths of VFC. At a 30% premium to LULU’s current stock price, a $7.6 billion (net of cash) deal would be large for VFC, but no longer seems out of the realm of possibility. The company also fits VFC’s publicly stated requirements of a brand that is focused on the outdoor and active lifestyle industry, as well as one that has meaningful international growth opportunities. We think an acquisition would be $0.11-$0.79 accretive to VFC’s EPS."

For an analyst ratings summary and ratings history on VF Corp. click here. For more ratings news on VF Corp. click here.

Shares of VF Corp. closed at $67.04 yesterday.

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