Is L Brands, Inc. (LB) part of your portfolio? If not, then this is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further.
The stock carries a Zacks Rank #2 (Buy) and has surged roughly 46% year-to-date, demonstrating its inherent strength. The company’s long-term earnings per share growth rate stands at a healthy 12.2%. We believe that it could prove to be a solid bet for investors.
The company’s primary strength is its earnings surprise history. In the trailing seven quarters, L Brands has beaten the Zacks Consensus Estimate by an average of 5%, including 10% for the last concluded quarter. Since the announcement of the company’s third-quarter fiscal 2014 results on Nov 19, L Brands’ shares have increased 11.2%.
The company posted earnings of 44 cents a share that surpassed the Zacks Consensus Estimate of 40 cents and surged 42% from the prior-year earnings of 31 cents on the back of higher sales. This prompted management to raise its full-year earnings projection.
Management now forecasts earnings in the range of $1.61 to $1.71 per share for the fourth quarter and between $3.21 and $3.31 per share for fiscal 2014, up from $3.03 to $3.18 forecast earlier. The current Zacks Consensus Estimate for the fourth quarter and fiscal 2014 are $1.73 and $3.33, respectively.
We believe that L Brands’ sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives have kept it afloat in a soft consumer environment. The company’s foray into international markets is likely to bring long-term growth opportunities as these stores continue to perform well and are generating increased sales volumes.
L Brands continues to revamp its business by improving store experience, localizing assortments and enhancing its direct business. We believe that these measures will help it to generate incremental sales and increase store transactions through a higher conversion rate.
Also, the stock hit a 52-week high of $86.91 yesterday before eventually closing at $86.36.
Other Stocks That Warrant a Look
Better-ranked stocks worth considering in the retail sector include Pacific Sunwear of California Inc. (PSUN), Columbia Sportswear Co. (COLM) and G-III Apparel Group, Ltd. (GIII), all sporting a Zacks Rank #1 (Strong Buy).
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