L Brands (LB), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, is slated to report second-quarter fiscal 2014 results on Aug 20. In the last quarter, it posted a positive surprise of 3.9%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
L Brands commands a market leading position in the lingerie, personal care and beauty segments. We believe that the company’s innovation in merchandise and exclusive assortments remain popular among consumers and sets it apart from peers. However, management had earlier indicated that margins are likely to remain muted on account of probable pressure on merchandise margins and buying and occupancy deleverage. The company had previously forecasted gross margin to decline year over year both for the second quarter and fiscal 2014. The company’s aggressive promotional strategy to gain market share may also hurt margins.
Earnings Whispers
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, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Earnings ESP for L Brands is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 62 cents.
Zacks Rank: L Brands carries a Zacks Rank #2 (Buy). Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Stocks That Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements:
Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +0.79% and a Zacks Rank #1 (Strong Buy).
Abercrombie & Fitch Co. (ANF) has an Earnings ESP of +20.00% and a Zacks Rank #2.
GameStop Corp. (GME) has an Earnings ESP of +10.53% and a Zacks Rank #3 (Hold).
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