UBS Cuts Price Target on L Brands (LB) to $68 Following 1Q EPS Beat
UBS maintained a Neutral rating on L Brands (NYSE: LB), and cut the price target to $68.00 (from $74.00), following the company's 1Q earnings report. LB reported EPS of $0.59, coming in ahead of the Street's $0.55 estimate. However, management lowered '16 guidance to $3.60-3.80 from $3.90-4.10.
Analyst Michael Binetti commented, "LB reported 1Q EPS of $0.59 (vs UBSe/Street: $0.55), but lowered '16 guidance to $3.60-3.80 from $3.90-4.10 based on 1) -$0.20 from recently-decelerating VS SSS and new VS initiatives (like eliminating Swim and clearing inventory); and 2) a -$0.10 drag to invest in the newly acquired China business. FY16 GMs now are anticipated to be worse vs. initial guidance based on worse-than-expected 1Q results (-170bp vs UBSe: -100bp, Street: -90bp) that were hurt by a promotional misstep in April, and higher markdowns through the year from the exit of non-core VS categories (swim, online only shoes/apparel/accessories). LB's revised EPS guidance is below our recently-lowered FY16 estimate (LB Downgrade to Neutral)—at $3.60-$3.80 vs $3.90-$4.10 prev. We're lowering our FY16E EPS to $3.70 from $3.93 (lowered in downgrade from $4.20)."
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Shares of L Brands closed at $63.78 yesterday.