UPDATE: Brean Capital Initiates Coverage On L Brands On Valuation

In a report published Tuesday, Brean Capital analyst Liz Pierce initiated coverage on L Brands, Inc. LB with a Hold rating. In the report, Brean Capital noted, "We are initiating coverage of L Brands, Inc., (LB) with a Hold rating and fair value of $95. LB, through its Victoria's Secret (VS), PINK, Bath & Body Works (BBW), La Senza and Henri Bendel brands, sells women's intimate and other apparel, personal care and beauty products. We believe both VS and BBW have high global brand awareness with strong consumer attachment, which positions each for significant global growth. "Moreover as international becomes a bigger part of the mix, we expect it will become increasingly accretive to the overall operating margin given its higher margin structure. Nonetheless, we believe the current valuation reflects most of the aforementioned factors. Furthermore, LB's operating margin is already industry leading and, therefore, it could be difficult to drive meaningful expansion from current levels. Finally, the stock is currently trading at 25.8x our FY15 EPS estimate of $3.65, a premium to our estimated 3-year CAGR of 12% and on a relative basis, a premium to its peer group multiple of 10.2x. "Accordingly, we believe the stock is fairly valued and would look for a pullback before becoming more constructive in the name. Our fair value of $95 is based on a multiple of 23.5x our FY16 EPS estimate of $4.05 and a PEG ratio of 1.9x." L Brands closed on Monday at $94.20.