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L Brands (LB) Q3 Earnings Preview: What's in the Cards?

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L Brands, Inc. (LB - Free Report) , a specialty retailer of women’s intimate and other apparel, beauty and personal care products, is slated to report third-quarter fiscal 2016 results on Nov 16. The question lingering in investors’ minds is whether the company will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 8.6%. Let’s see how things are shaping up prior to this announcement.

Zacks Model Shows Unlikely Earnings Beat

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 can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

L Brands carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 40 cents. The combination of L Brands’ Zacks Rank #3 and 0.00% ESP makes surprise prediction difficult.

We note that the Zacks Consensus Estimate witnessed a downward revision of 5 cents over the past 30 days.

Factors Influencing this Quarter

We believe that L Brands’ sustained focus on cost containment, inventory management as well as merchandise and speed-to-market initiatives has kept it afloat in a sluggish consumer environment. Moreover, it commands a market-leading position in the lingerie, personal care and beauty segments. We believe that the company’s innovations in merchandise and exclusive assortments remain popular among consumers, thereby setting it apart from peers.

However, given 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.

L BRANDS INC Price and EPS Surprise


L BRANDS INC Price and EPS Surprise | L BRANDS INC Quote

The company reported net sales of $2.581 billion, up 4%, and comparable sales increase of 2% for the 13 weeks ended Oct 29, 2016. L Brands projects third-quarter earnings to be 40 cents a share, compared with its previous guidance of 40–45 cents and prior-year quarter’s result of 55 cents.

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:

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +6.06% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dave & Buster's Entertainment, Inc. (PLAY - Free Report) has an Earnings ESP of +15.39% and a Zacks Rank #3.

Express Inc. (EXPR - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank #3.

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