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Factors Likely to Decide L Brands' (LB) Fate in Q2 Earnings
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L Brands, Inc. is likely to register a decline in the top line when it reports second-quarter fiscal 2020 numbers on Aug 19, after the market closes. The Zacks Consensus Estimate for revenues is pegged at $2,271 million, indicating a decline of 21.7% from the prior-year reported figure.
In fact, the Zacks Consensus Estimate for the bottom line stands at a loss of 36 cents that narrowed by 11 cents in the past 30 days. The consensus mark compares unfavorably with earnings of 24 cents a share reported in the year-ago quarter.
Notably, this specialty retailer of women’s intimate and other apparel, beauty, and personal care products has a trailing four-quarter negative earnings surprise of 3%, on average. In the last reported quarter, the company missed the Zacks Consensus Estimate by a wide margin.
Key Factors to Note
L Brands’ Victoria’s Secret unit has been witnessing soft sales for quite some time now owing to stiff competition and consumers’ changing preferences. This is likely to have weighed on the company’s top-line performance. Further, the company has been grappling with strained margins for a while now.
In a recent release on Jul 28, management guided net sales decline of approximately 20% on a year-over-year basis for the second quarter. L Brands projected sales decline of about 40% at its Victoria’s Secret segment.
Nonetheless, the company remains focused on cost containment, inventory management and curbing capital expenditures. Markedly, the company in co-operation with suppliers has been identifying opportunities to lower merchandise costs. This might have helped in improving merchandise margin rates at Victoria’s Secret. Notably, Bath & Body Works segment has been the company’s bright spot. The company projected sales growth of roughly 10% at Bath & Body Works segment for the to-be-reported quarter.
Additionally, the company informed that total direct channel sales at both businesses were up substantially compared with the last year, offset by a fall in store sales. We note that stores were closed at some point during the quarter due to the coronavirus pandemic.
Our proven model does not conclusively predict an earnings beat for L Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Although L Brands carries a Zacks Rank #3, it has an Earnings ESP of -4.74%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With Favorable Combination
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:
Big Lots (BIG - Free Report) has an Earnings ESP of +5.04% and a Zacks Rank #3.
Lowe's Companies (LOW - Free Report) has an Earnings ESP of +6.48% and a Zacks Rank #3.
Today's Best Stocks from Zacks
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This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
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Factors Likely to Decide L Brands' (LB) Fate in Q2 Earnings
L Brands, Inc. is likely to register a decline in the top line when it reports second-quarter fiscal 2020 numbers on Aug 19, after the market closes. The Zacks Consensus Estimate for revenues is pegged at $2,271 million, indicating a decline of 21.7% from the prior-year reported figure.
In fact, the Zacks Consensus Estimate for the bottom line stands at a loss of 36 cents that narrowed by 11 cents in the past 30 days. The consensus mark compares unfavorably with earnings of 24 cents a share reported in the year-ago quarter.
Notably, this specialty retailer of women’s intimate and other apparel, beauty, and personal care products has a trailing four-quarter negative earnings surprise of 3%, on average. In the last reported quarter, the company missed the Zacks Consensus Estimate by a wide margin.
Key Factors to Note
L Brands’ Victoria’s Secret unit has been witnessing soft sales for quite some time now owing to stiff competition and consumers’ changing preferences. This is likely to have weighed on the company’s top-line performance. Further, the company has been grappling with strained margins for a while now.
In a recent release on Jul 28, management guided net sales decline of approximately 20% on a year-over-year basis for the second quarter. L Brands projected sales decline of about 40% at its Victoria’s Secret segment.
Nonetheless, the company remains focused on cost containment, inventory management and curbing capital expenditures. Markedly, the company in co-operation with suppliers has been identifying opportunities to lower merchandise costs. This might have helped in improving merchandise margin rates at Victoria’s Secret. Notably, Bath & Body Works segment has been the company’s bright spot. The company projected sales growth of roughly 10% at Bath & Body Works segment for the to-be-reported quarter.
Additionally, the company informed that total direct channel sales at both businesses were up substantially compared with the last year, offset by a fall in store sales. We note that stores were closed at some point during the quarter due to the coronavirus pandemic.
L Brands, Inc. Price, Consensus and EPS Surprise
L Brands, Inc. price-consensus-eps-surprise-chart | L Brands, Inc. Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for L Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Although L Brands carries a Zacks Rank #3, it has an Earnings ESP of -4.74%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With Favorable Combination
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:
Dollar General (DG - Free Report) has an Earnings ESP of +6.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Big Lots (BIG - Free Report) has an Earnings ESP of +5.04% and a Zacks Rank #3.
Lowe's Companies (LOW - Free Report) has an Earnings ESP of +6.48% and a Zacks Rank #3.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q2 2020, while the S&P 500 gained an impressive +44.0%, five of our strategies returned +50.9%, +93.8%, +122.2%, +153.0%, and even +156.8%.
This outperformance has not just been a recent phenomenon. From 2000 – Q2 2020, while the S&P averaged +5.5% per year, our top strategies averaged up to +51.7% per year.
See their latest picks free >>