Here's How L Brands (LB) Looks Just Ahead of Q3 Earnings
L Brands, Inc. LB is likely to register a marginal decline in the top line when it reports third-quarter fiscal 2020 numbers on Nov 18, after the market closes. The Zacks Consensus Estimate for revenues is pegged at $2,673 million, suggesting a slight decline of 0.1% from the prior-year reported figure. We also note that the rate of sales decline is likely to decelerate sharply on a sequential basis. The company had witnessed a decline of 20% in the last-reported quarter.
The Zacks Consensus Estimate for earnings for the quarter under review has increased by a penny to 6 cents over the past 30 days. The consensus estimate suggests a sharp improvement from earnings of 2 cents reported in the year-ago quarter.
Notably, this specialty retailer of women’s intimate and other apparel, beauty, and personal care products has a trailing four-quarter earnings surprise of 33.8%, on average. In the last reported quarter, the company’s bottom line outperformed the Zacks Consensus Estimate by a wide margin.
Key Factors to Note
L Brands’ third-quarter results are likely to reflect sturdy performance at Bath & Body Works and strength in the direct business at Victoria’s Secret segment. The Zacks Consensus Estimate for Bath & Body Works revenues is pegged at $1,226 million, which indicates an improvement of approximately 15% from the year-ago quarter. Markedly, the consensus estimate for Victoria’s Secret Direct business currently stands at $364 million, suggesting year-over-year growth of 10%.
Without a doubt, L Brands remains committed to improving performance by staying customer-focused, enriching assortments, and enhancing store and online experiences. The company has been managing inventory, optimizing capital expenditures and reducing overhead expenses. Markedly, the company in co-operation with suppliers has been identifying opportunities to lower merchandise costs. This might have helped in improving merchandise margin rates at Victoria’s Secret.
However, on its last earnings call management highlighted about expense pressure owing to higher store expenses, including payroll and supplies, as a result of the new labor model on account of social distancing measures, wage rate inflation in the domestic supply chain, and increased direct channel fulfillment and shipping costs. These might get reflected on margins in the to-be reported quarter.
L Brands, Inc. Price, Consensus and EPS Surprise
L Brands, Inc. price-consensus-eps-surprise-chart | L Brands, Inc. Quote
What the Zacks Model Unveils
Our proven model conclusively predicts an earnings beat for L Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
L Brands has a Zacks Rank #3 and an Earnings ESP of +175.00%.
3 More Stocks With a Favorable Combination
Here are three other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:
Dollar General DG has an Earnings ESP of +16.53% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lowe's Companies LOW has an Earnings ESP of +7.78% and a Zacks Rank #3.
Costco COST has an Earnings ESP of +1.00% and a Zacks Rank #3.
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