UPDATE: MKM Partners Downgrades L Brands (LB) to Neutral
MKM Partners downgraded L Brands (NYSE: LB) from Buy to Neutral with a price target of $60.00 (from $83.00). The change followed disappointing guidance. Analyst Roxanne Meyer said L Brands bullish thesis was "busted."
"While we continue to view LB as an emerging global powerhouse with abundant topline and margin growth opportunities LT, recently decelerating comps give us less conviction in fundamentals, with a change in the leadership in lingerie signaling that execution issues could continue. This occurs at a time when couponing will be substantially pulled back, the impact of which remains an unknown. Additionally, while moving China to a wholly owned model should pay dividends long-term, we are disappointed with the pace of international accretion to-date (although largely macro driven); it is not playing out as a driver of incremental earnings as we had believed," said Meyer.
"We have lowered our 2016 EPS estimate to $3.62 from $4.02, at the lower end of revised guidance, but still see potential for downside risk if either VS fundamentals slide further or if the impact of removing coupons is worse than anticipated. Our FV estimate is now $60 from $83, which is 15x our new 2017 EPS estimate of $4.00. We believe a trough multiple is now warranted given weaker fundamentals and lower visibility, as well as lower than anticipated accretion from international," added the analsyt.
For an analyst ratings summary and ratings history on L Brands click here. For more ratings news on L Brands click here.
Shares of L Brands closed at $63.78 yesterday.