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Morgan Stanley: The Bull Case For L Brands In 2018

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Morgan Stanley: The Bull Case For L Brands In 2018
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For most of 2017 investors were left wondering if L Brands Inc (NYSE: LB)'s woes were company-specific or industrywide. As 2018 approaches, one Wall Street analyst said the debate will be settled soon.

The Analyst

Morgan Stanley's Kimberly Greenberger maintains an Overweight rating on L Brands' stock with a price target boosted from $59 to $70.

The Thesis

After two years of showing declining earnings per share, L Brands will show an inflection in sales and earnings, Greenberger said in a research report. (See Greenberger's track record here.)

Most notably, the Victoria's Secret comp — excluding swim and apparel — finally returned to positive territory in October after a nine-month-long streak of flat-to-negative results, the analyst said. The one-year underlying Victoria's Secret comp sans swim and apparel has been gradually improving since June, she said. 

Many investors operate under the assumption that L Brands' weak fundamentals are due to structural pressures in the overall retail industry, including falling mall traffic and threats from e-commerce, Greenberger said. But it may be a mistake to assume this will continue in 2018 given the analyst's estimates, which call for 5-percent EPS growth, 2-percent overall comp growth (Victoria's Secret at 2 percent, BBW at 3 percent), 3.2-percent total revenue growth and 30-basis-point margin recovery versus a 150-basis-point decline in 2017 and 200-basis-point decline in 2016.

Price Action

L. Brands was trading down slightly at $58.50 at the time of publication. 

Related Links:

9% Downside Seen In L Brands As New Merchandise Struggles To Gain Fans

L Brands: 4 Reasons For Concern

Photo courtesy of L Brands. 

Latest Ratings for LB

DateFirmActionFromTo
Jan 2019JP MorganMaintainsNeutralNeutral
Jan 2019Wells FargoMaintainsOutperformOutperform
Dec 2018CitigroupInitiates Coverage OnMarket Weight

View More Analyst Ratings for LB
View the Latest Analyst Ratings

Posted-In: Kimberly Greenberger malls retailers Victorias SecretAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

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