Why L Brands (LB) Stock Is Dropping This Morning

NEW YORK (TheStreet) -- Shares of L Brands Inc.  (LB) are falling -5.46% to $58.48 after it reported June same-store sales that rose 2% from year ago levels, which is below the average analyst estimate compiled by Thomson Reuters of 3.1% growth. 

The company said sales at Victoria's Secert stores in North America increased 3% in the period, while Bath & Body Works North America comps were up 1% in June.

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TheStreet Ratings team rates L BRANDS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate L BRANDS INC (LB) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and good cash flow from operations. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LB's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • L BRANDS INC has improved earnings per share by 10.4% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, L BRANDS INC increased its bottom line by earning $3.05 versus $2.54 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $3.05).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The net income growth from the same quarter one year ago has exceeded that of the Specialty Retail industry average, but is less than that of the S&P 500. The net income increased by 9.8% when compared to the same quarter one year prior, going from $143.00 million to $157.00 million.
  • 45.67% 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, the net profit margin of 6.56% trails the industry average.
  • You can view the full analysis from the report here: LB Ratings Report
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