Analysts React To L Brands Earnings

L Brands Inc LB stock traded higher by 4 percent Thursday after the company reported first-quarter earnings.

Several Wall Street analysts weighed in on the stock following the report. Here’s a sampling of what they had to say.

Voices From The Street

Nomura analyst Simeon Siegel said the company’s guidance cut was an ominous sign.

“1Q raised a number of red flags (severe margin contraction at LB, bloated inventory and a guidedown for the remainder of the year), and had few positives ([Bath & Body Works] margin continuing its stabilization/expansion),” Siegel wrote.

Piper Jaffray analyst Erinn Murphy said investors should approach L Brands stock with caution.

“While BBW is executing well, we remain sidelined given multiple sources of competitive pressure surrounding [Victoria’s Secret],” Murphy wrote.

Buckingham Research Group analyst Kelly Crago said the guidance cut reflects a more realistic outlook from management and may have eliminated some of the risk in the stock.

“Additionally, we were encouraged by the company's emphasis on supply chain and technology investments, a big positive, in our view, as we believe the company is behind on crucial omni-channel investments,” Crago wrote.

Bank of America analyst Lorraine Hutchison said lackluster Victoria’s Secret performance continued to weigh on L Brands.

“With no margin recovery in sight, we view the stock as expensive and see risk to both brands’ profitability,” Hutchison wrote.

Ratings And Targets

• Nomura has a Neutral rating and $29 target.
• Piper Jaffray has a Neutral rating and $30 target.
• Buckingham Research Group has a Neutral rating and $31 target.
• Bank of America has an Underperform rating and $29 target.

At time of publication, the stock traded around $35.31.

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Image credit: Dwight Burdette, CC BY 3.0, via Wikimedia Commons