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Why L Brands (LB) Might be Well Poised for a Surge

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L Brands appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this owner of Victoria's Secret, Bath & Body Works and other chain stores is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for L Brands, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $2.64 per share for the current quarter, which represents a year-over-year change of +40.43%.

Over the last 30 days, the Zacks Consensus Estimate for L Brands has increased 46.58% because nine estimates have moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $3.12 per share, representing a year-over-year change of +36.24%.

The revisions trend for the current year also appears quite promising for L Brands, with nine estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 35.76%.

Favorable Zacks Rank

Thanks to promising estimate revisions, L Brands currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

L Brands shares have added 20.3% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

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