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Will L Brands, Inc. (LTD) Disappoint This Earnings Season?

BBY HBI FIVE

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L Brands, Inc. , the specialty retailer of women’s intimate and other apparel, beauty and personal care products, is set to report third-quarter fiscal 2013 results on Nov 20, 2013. Last quarter, it posted a positive surprise of 1.7%. Let us see how things are shaping up for this announcement.

Growth Factors in the Quarter

L Brands benefited from a rise in discretionary spending by customers due to the recovering economy. Moreover, the company’s sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept it afloat in a sluggish consumer environment. The company’s presence into international markets is likely to drive long-term growth as these stores continue to perform better than those in the U.S.

Earnings Whispers?

Our proven model does not conclusively project L Brands as likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  ESP for L Brands is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 28 cents.

Zacks #3 Rank (Hold): L Brands’ Zacks Rank #3 (Hold) lowers the predictive power of ESP because this Zacks Rank when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows these to have the right combination of elements to post an earnings beat: 

  • Best Buy Co., Inc. (BBY - Analyst Report) with Earnings ESP of 9.1% and Zacks Rank #1 (Strong Buy)
  • Hanesbrands Inc. (HBI - Analyst Report) with Earnings ESP of 1.11% and Zacks Rank #1 (Strong Buy)
  • Five Below, Inc. (FIVE - Snapshot Report) with Earnings ESP of 25.00% and Zacks Rank #2 (Buy)

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