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L Brands (LB) Q4 Earnings: Stock Likely to Disappoint?
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L Brands, Inc. , a specialty retailer of women’s intimate and other apparel, beauty and personal care products, is slated to report fourth-quarter fiscal 2016 results on Feb 22. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 9%. Let’s see how things are shaping up prior to this announcement.
What to Expect?
The question lingering in investors’ minds now is, whether L Brands will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is $1.90, reflecting a year-over-year decline of over 11%. We noted that the Zacks Consensus Estimate has increased by 3 cents in the past 30 days. Analysts polled by Zacks expect revenues of $4,497 million, up about 2.3% from the year-ago quarter.
L Brands forms part of the Retail-Wholesale sector. As per the latest Earnings Preview, total earnings for the sector are expected to decline marginally by 1.2%, however, revenue is projected to improve 4.7%. We noted that the Retail-Wholesale sector has lagged the broader market in the past three months. In the said time frame this Zacks categorized sector gained 3.7%, while S&P 500 index advanced 6.7%.
Factors at Play
L Brands has exhibited a bearish run in the past six months plunging roughly 26.2% compared with the Zacks categorized Retail-Apparel/Shoe industry that declined 15.7%. The company's January comps slid 4%, following a 1% dip in December and an increase of 4% in Nov 2016. Net sales fell 1% for the month of January. However, the company reported flat comps and recorded sales growth of 2% for fourth-quarter fiscal 2016. Further, it now expects earnings to be approximately $1.90 per share compared with prior guidance for the low end of its initial projection of $1.85–$2.00.
The company now foresees short-term challenges on account of its decision to exit the swimwear category, which according to analysts have failed to generate desired results. For the fourth quarter, the exit of the swim and apparel categories had an adverse impact of 2% and 4% to total company and Victoria’s Secret comparable sales, respectively.
Further, the competitive retail landscape, the aggressive promotional strategies undertaken to gain market share may weigh upon the company’s margins in the quarter to be reported. Moreover, foreign currency headwinds may play spoilsport.
What the Zacks Model Unveils?
Our proven model does not conclusively show that L Brands is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
L Brands has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at $1.90. Moreover, the company carries a Zacks Rank #5 (Strong Sell).
Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +2.42% and a Zacks Rank #2.
The Home Depot, Inc. (HD - Free Report) has an Earnings ESP of +2.26% and a Zacks Rank #3.
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L Brands (LB) Q4 Earnings: Stock Likely to Disappoint?
L Brands, Inc. , a specialty retailer of women’s intimate and other apparel, beauty and personal care products, is slated to report fourth-quarter fiscal 2016 results on Feb 22. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 9%. Let’s see how things are shaping up prior to this announcement.
What to Expect?
The question lingering in investors’ minds now is, whether L Brands will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is $1.90, reflecting a year-over-year decline of over 11%. We noted that the Zacks Consensus Estimate has increased by 3 cents in the past 30 days. Analysts polled by Zacks expect revenues of $4,497 million, up about 2.3% from the year-ago quarter.
L Brands forms part of the Retail-Wholesale sector. As per the latest Earnings Preview, total earnings for the sector are expected to decline marginally by 1.2%, however, revenue is projected to improve 4.7%. We noted that the Retail-Wholesale sector has lagged the broader market in the past three months. In the said time frame this Zacks categorized sector gained 3.7%, while S&P 500 index advanced 6.7%.
Factors at Play
L Brands has exhibited a bearish run in the past six months plunging roughly 26.2% compared with the Zacks categorized Retail-Apparel/Shoe industry that declined 15.7%. The company's January comps slid 4%, following a 1% dip in December and an increase of 4% in Nov 2016. Net sales fell 1% for the month of January. However, the company reported flat comps and recorded sales growth of 2% for fourth-quarter fiscal 2016. Further, it now expects earnings to be approximately $1.90 per share compared with prior guidance for the low end of its initial projection of $1.85–$2.00.
The company now foresees short-term challenges on account of its decision to exit the swimwear category, which according to analysts have failed to generate desired results. For the fourth quarter, the exit of the swim and apparel categories had an adverse impact of 2% and 4% to total company and Victoria’s Secret comparable sales, respectively.
Further, the competitive retail landscape, the aggressive promotional strategies undertaken to gain market share may weigh upon the company’s margins in the quarter to be reported. Moreover, foreign currency headwinds may play spoilsport.
What the Zacks Model Unveils?
Our proven model does not conclusively show that L Brands is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
L Brands has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at $1.90. Moreover, the company carries a Zacks Rank #5 (Strong Sell).
L Brands, Inc. Price, Consensus and EPS Surprise
L Brands, Inc. Price, Consensus and EPS Surprise | L Brands, Inc. Quote
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Papa John's International, Inc. (PZZA - Free Report) has an Earnings ESP of +4.55% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +2.42% and a Zacks Rank #2.
The Home Depot, Inc. (HD - Free Report) has an Earnings ESP of +2.26% and a Zacks Rank #3.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>