Brean Upgrades L Brands To Buy; 'Overreaction Presents Buying Opportunity'

• The share price of L Brands Inc LB has declined 11.87 percent over the past one month, although it has appreciated 4.16 percent over the last six months.
• Brean Capital’s Liz Pierce has upgraded the rating on the company from Hold to Buy, with a price target of $100.
• Following the market reaction to the company’s January comp miss, Pierce believes that the stock is now oversold.

Analyst Liz Pierce explained that “January’s comp miss was largely attributable to an earlier start date of VSS’ semi-annual sale and since this was the first time the sale started earlier, some variation from plan is understandable.”

Also, based on recent checks and the higher than expected sales for VSS in December do not indicate that there is any problem with the product, marketing or customer engagement.

“We also continue to believe LB is well-positioned for significant global growth given strong brand awareness of all brands and the strong consumer attachment to its brands,” Pierce said, while adding that “as international grows, given its higher margin structure, it should become increasingly accretive to overall margins.”

L Brands has announced another special dividend of $2 per share, representing a 20 percent increase in the regular dividend. The company has also authorized the buyback of shares worth $500 million.

Therefore, L Brands continues “its streak of returning excess capital to shareholders,” Pierce noted, while stating that the stock deserves a premium valuation, given the consistent results and global growth potential of all of the company’s brands.

All this also qualifies the company as a Best-of-Breed retailer.