Stifel affirms its Hold rating on L Brands (NYSE: LB) following Q1 results reported yesterday.

Analyst Richard Jaffe noted that LB's Q1 EPS of $0.61 came in 1 cent above the firm's estimate. The analyst also commented, Management established 2Q EPS guidance of $0.60 - $0.65, well below the Street’s and our prior estimate of $0.69. However, we believe this is likely a case of under-promise, over-deliver as LB’s management tends to provide conservative guidance at the beginning of the quarter only to beat this guidance significantly at the end of the quarter.

Jaffe still sees LB shares as overvalued amid a recent sell-off since the middle of last month. We have limited visibility for substantial share appreciation above the current level. We believe the current share price reflects an optimistic outlook for earnings growth, with little margin for error. We believe the reward is limited and risk, as always, remains significant, given the volatility of consumer preferences. Our outlook remains highly favorable regarding the future of the organization, but find limited upside at the current share price, the analyst commented.

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