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What’s in the Cards for L Brands (LB) in Q1 Earnings?


L Brands, Inc. LB, a specialty retailer of women’s intimate and other apparel, beauty and personal care products, is slated to report first-quarter fiscal 2017 results on May 17. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 9.4%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether L Brands will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 29 cents, reflecting a year-over-year decline of 50%. We noted that the Zacks Consensus Estimate has decreased by 5 cents in the past 30 days. Analysts polled by Zacks anticipate revenues of $2,456 million, down over 6% from the year-ago quarter.

L Brands forms part of the Retail-Wholesale sector. As per the latest Earnings Preview, total earnings for the sector are expected to decline by 1.7%, however, revenue is projected to improve 3.3%. As of May 12, 24 out of 42 S&P 500 retailers have reported earnings among them 58.3% and 54.2% have surpassed earnings and revenues estimates, respectively.

Factors at Play

L Brands has exhibited a bearish run in the past three months declining roughly 13.8% compared with the Zacks categorized Retail-Apparel/Shoe industry’s fall of 8.7%. The company witnessed a decline in comparable sales (comps) for the fifth consecutive month as the company reported April sales numbers. This specialty retailer of women’s intimate and other apparel, beauty and personal care products posted 5% decline in comps for the four-week ended Apr 29 after registering a decline of 10%,13%, 4% and 1% in March, February, January and December, respectively.

Further, the company also reported first-quarter 2017 sales number. In the first quarter, sales declined 7% to $2,437 million. Comps in the first quarter decreased 9%. The exit from the swim and apparel categories had hurt the overall company and Victoria’s Secret comparable sales by 6 percentage points and 9 percentage points, respectively. However, the company raised first-quarter earnings guidance to 30 cents from a band of 20–25 cents a share on account of lower tax rate.

Further, L Brands continues to revamp business by improving store experience, localizing assortments and enhancing direct business. We believe these measures facilitate it to generate incremental sales and increase store transactions through higher conversion rate.

L Brands, Inc. Price, Consensus and EPS Surprise

L Brands, Inc. Price, Consensus and EPS Surprise | L Brands, Inc. Quote

What the Zacks Model Unveils?

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

L Brands has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both are pegged at 29 cents. Moreover, the company carries a Zacks Rank #3.

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:

Best Buy Co., Inc. BBY has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Home Depot, Inc. HD has an Earnings ESP of +0.62% and a Zacks Rank #2.

Lowe's Companies, Inc. LOW has an Earnings ESP of +0.94% and a Zacks Rank #3.

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