"L Brands continues to lack any near-term catalysts that we think would drive shares out of their current range, keeping us on the sidelines," analyst Laura Champine said.
Analysts cited that the reduction of the price target was based on their DCF model as they are adjusting their long-term, bottom-line projections slightly lower on the expectation for labor and other cost inflation.
However, they added that a decision to more aggressively expand the Victoria's Secret lingerie business on a global scale would be the catalyst they would like to see to be more constructive.
L Brands is an international company that operates as a specialty retailer of women's intimate and other apparel. Its flagship brands include Victoria's Secret and Bath & Body Works.
TheStreet Ratings team rates L BRANDS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate L BRANDS INC (LB) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, solid stock price performance and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- L BRANDS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, L BRANDS INC increased its bottom line by earning $3.49 versus $3.05 in the prior year. This year, the market expects an improvement in earnings ($3.74 versus $3.49).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 59.5% when compared to the same quarter one year prior, rising from $157.00 million to $250.47 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 58.49% and other important driving factors, this stock has surged by 59.81% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- 42.04% is the gross profit margin for L BRANDS INC which we consider to be strong. Regardless of LB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LB's net profit margin of 9.97% compares favorably to the industry average.
- You can view the full analysis from the report here: LB Ratings Report