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L Brands Tops Q1 Earnings and Revenue Estimates; Target Price $78

By:
Vivek Kumar
Updated: Jul 20, 2021, 10:59 UTC

L Brands, a specialty retailer focused on women’s intimate and other apparel, reported better-than-expected earnings and revenue in the first quarter, largely driven by continued strength and exceptional performance at Bath & Body Works and Victoria’s Secret.

L Brands Tops Q1 Earnings and Revenue Estimates; Target Price $78

L Brands, a specialty retailer focused on women’s intimate and other apparel, reported better-than-expected earnings and revenue in the first quarter, largely driven by continued strength and exceptional performance at Bath & Body Works and Victoria’s Secret.

The Columbus, Ohio-based fashion retailer reported adjusted earnings per share of $1.25 on revenue of $3.02 billion in the quarter ended May 1, 2021, better compared to a loss per share of $0.99 in the same period a year ago. That also beat the Wall Street consensus estimates of $1.17 per share on $2.84 billion.

L Brands said its first-quarter operating income was $572.1 million, up from a loss of $317.7 million last year, and net income was $276.6 million compared to a loss of $296.9 million last year

The company which was listed as 248 on the 2020 Fortune 500 list of largest United States companies by revenue said it is forecasting second-quarter earnings per share in the range of $0.80 and $1.00, which excludes one-time costs related to the spin-off of Victoria’s Secret, compared to adjusted earnings per share of $0.25 in 2020 and $0.24 in 2019.

But that upbeat results did not help L Brands stock, which slumped about 4% to $64.68 on Thursday. The stock rose over 70% so far this year.

Analyst Comments

L Brands’ (LB) pre-announcement previewed 1Q’s above-expectations result. But the beat & above-consensus 2Q guidance were not enough to send shares higher today, even though the stock trades in-line with historical valuation levels & well below all-time highs. Raise price target to $84 & highlight ’21 EPS upside,” noted Kimberly C Greenberger, equity analyst at Morgan Stanley.

L Brands Stock Price Forecast

Seventeen analysts who offered stock ratings for L Brands in the last three months forecast the average price in 12 months of $78.65 with a high forecast of $102.00 and a low forecast of $65.00.

The average price target represents a 21.60% increase from the last price of $64.68. Of those 17 analysts, ten rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $84 with a high of $110 under a bull scenario and $40 under the worst-case scenario. The firm gave an “Overweight” rating on the specialty retailer’s stock.

“We continue to see a strong strategic rationale for the VS/BBW separation confirmed for Aug ’21. 2H20/1Q21 results & 2Q2 guidance confirm 1) VS has hit an inflection point in its long-debated turnaround, & 2) BBW is showing no signs of topline deceleration & could deliver higher profitability vs. history,” Morgan Stanley’s Greenberger added.

“This leaves us incrementally confident in VS’ turnaround & profitability trajectory (e.g., mid-teens OM) as well as BBW’s revenue growth sustainability & OM expansion opportunity (e.g., low-to-mid-20s+ %). BBW remains a stand-out across the retail space. 1Q21 results suggest higher future profitability (e.g., mid-20s %+). It would be a successful standalone public company.”

Several other analysts have also updated their stock outlook. CFRA raised the target price to $65. UBS upped the target price to $102 from $96. Deutsche Bank lifted the target price to $88 from $87. BMO increased the target price to $90 from $81. Credit Suisse raised the target price to $74 from $67.

Check out FX Empire’s earnings calendar

About the Author

Vivek has over five years of experience in working for the financial market as a strategist and economist.

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