Market Overview

Morgan Stanley: The Bull Case For L Brands In 2018

Morgan Stanley: The Bull Case For L Brands In 2018
Mid-Morning Market Update: Markets Open Lower; Target Earnings Miss Expectations
26 Stocks Moving In Tuesday's Pre-Market Session
Double-digit drop for L Brands (Seeking Alpha)

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

Nov 2018UBSMaintainsNeutralNeutral
Nov 2018CitigroupMaintainsBuyBuy
Nov 2018Wells FargoUpgradesMarket PerformOutperform

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


Related Articles (LB)

View Comments and Join the Discussion!

Latest Ratings

XECImperial CapitalDowngrades35.0
SSTIImperial CapitalUpgrades49.0
AVDLoop CapitalUpgrades29.0
FCREYDeutsche BankUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Afternoon Market Update: U.S. Stocks Turn Lower; ABM Industries Shares Slide

Four GBP Reports Set For Release On Thursday