In the midst of an astonishing nationwide cold snap, it’s a good time to see which stocks are poised to profit. Many investors would look to utilities and energy companies, but one of the best plays could be a leading cold-weather apparel maker. 

There’s no better way to bundle up in cold weather than with a warm jacket. For investors, that means VF Corp. (NYSE: VFC), owner of The North Face brand, is worth a long look.#-ad_banner-#

VF Corp., which also owns footwear maker Timberland and denim brand Lee and Wrangler, has been making the transition to e-commerce and increasing its direct-to-consumer business, which has higher margins. In the third quarter, these initiatives paid off as direct-to-consumer sales jumped 14%. Direct-to-consumer sales were even stronger for The North Face, which posted a sales increase of 28%. 

Overall, revenue rose 5% in the quarter from the same period the previous year, to $3.3 billion, and earnings per share (EPS) of $3.91 was $0.13 better than expectations. Of the company’s 15 brands, 14 posted sales gains.

For the full year, VF Corp. is expected to generate $1.4 billion in cash. Of this, $400 million will go toward debt reduction. The company now has $1.9 billion in debt, which is low for a company with an enterprise value of $28.9 billion.

VF Corp. remains one of the most shareholder-friendly companies in the apparel space. The company just increased its quarterly dividend by 21%, to $1.05 a share. This represents the 41st consecutive year VF Corp. has increased its dividend, and with a payout ratio of 33%, there’s room to boost the dividend even more. 

	© The North Face
	A mid-teens sales growth rate is expected in Europe and China, and The North Face has customized its product offerings and marketing campaign for each market.

VF Corp. is following a five-year growth plan emphasizing selling directly to its customers, expanding across all geographic markets, and developing innovative products. The best example of product innovation is the new Thermoball jacket, which is the centerpiece of The North Face stores within 300 Dick’s Sporting Goods (NYSE: DKS) locations.

Internationally, there’s tremendous potential for The North Face. A mid-teens sales growth rate is expected in Europe and China, and The North Face has customized its product offerings and marketing campaign for each market. The results speak for themselves: In the third quarter, revenue in China grew 11%, and direct-to-consumer sales in Europe rose 20%.

Asia is also a key market for Timberland, which is celebrating the 40th anniversary of its famous yellow work boots. In the third quarter, revenue was up 9% on gains in men’s and women’s footwear. Sales of women’s boots doubled from the prior year.

VF Corp. is trading at a price-to-earnings (P/E) multiple of 23, compared with competitors Columbia Sportswear (Nasdaq: COLM) at 28, Nike (NYSE: NKE) at 25, and apparel conglomerate PVH Corp. (NYSE: PVH) at 45. VF Corp. also has the highest operating margin among the four at 15%.

Risks to Consider: A jump in temperatures could lead to a slowing of outerwear sales. Although VF Corp. owns some of the leading brands in the cold-weather segment, a weak economy could lead consumers to choose more inexpensive alternatives.

Action to Take –> Buy shares of VF Corp. with a target price of $75 for upside of 20%. The dividend yield of 1.7% may appear meager, but the company is paying down debt, which should free up cash to continue its 41-year streak of dividend increases.