Limited Brands Inc.
), a specialty retailer of women's intimate and other apparel,
beauty and personal care products, and an S&P 500 company, is
scheduled to report its second-quarter 2012 financial results after
the market closes on Wednesday, August 15.
The current Zacks Consensus Estimate for the quarter is pegged
at 48 cents a share, in line with the prior-year quarter's
earnings. The estimates in the current Zacks Consensus range
between a low of 47 cents and a high of 48 cents a share. The Zacks
Consensus estimates revenue to be at $2,398 million for the
Recap of First-Quarter 2012
Limited Brands posted first-quarter 2012 earnings of 41 cents a
share beat the Zacks Consensus Estimate by a penny, and rose from
40 cents earned in the prior-year quarter.
Limited Brands, which competes with
), posted net sales of $2,153.8 million skidding 3% from the
prior-year quarter, and falling short of the Zacks Consensus
Estimate of $2,155 million. Limited Brands posted comparable-store
sales growth of 7% during the first quarter of 2012 compared with
7% in the previous quarter and 15% in the prior-year quarter.
Agreement of Estimate Revisions
The agreement of estimate revisions indicates that majority of
the analysts were unanimous in their opinion. In the last 30 days,
12 out of 19 analysts covering the stock increased their estimates,
whereas only 1 analyst lowered the same for the second quarter of
2012. For the third quarter, 3 analysts revised their estimates
upward and one made a downward revision.
For fiscal 2012 and 2013, 12 and 9 analysts, respectively,
revised their estimates in the upward direction in the last 30
days, whereas one analyst trimmed the estimate for the aforesaid
What Drives Estimate Revisions
Clearly, a positive sentiment is palpable among most of the
analysts, who remain optimistic on Limited Brands' performance.
Following July comparable-stores results, the Zacks Consensus
Estimates have been portraying an upward trend with the majority of
analysts remaining bullish on the stock.
Limited Brands posted strong comparable-store sales results for
the four-week period ended July 28, 2012. The company's
comparable-store sales for July 2012 rose 12% following an increase
of 7% in June and compared with a 6% growth in July 2011. The
increase resulted from strong sales at its Victoria's Secret Stores
and Bath & Body Works.
The better-than-expected July comparable-store sales performance
prompted management to raise second-quarter 2012 earnings guidance
to a range of 46 cents to 48 cents from 40 cents to 45 cents
Magnitude of Estimate Revisions
The magnitude of estimate revisions by the analysts is clearly
reflected through changes in the Zacks Consensus Estimates.
The Zacks Consensus Estimate for the second quarter of 2012
increased by a penny to 48 cents a share in the last 30 days. For
the third quarter, the Estimate remains constant at 24 cents.
For fiscal 2012 and 2013, the Zacks Consensus Estimates climbed
2 cents and 1 cent to $2.84 and $3.20, respectively, in the last 30
Positive Earnings Surprise History
With respect to earnings surprises, Limited Brands has topped
the Zacks Consensus Estimate over the last four quarters in the
range of 2.5% to 4.4%. The average remained at 3.4%, suggesting
that Limited Brands has outpaced the Zacks Consensus Estimate by
that magnitude in the trailing four quarters.
Given the past performance, we expect the company to outperform
the Zacks Consensus Estimate in the upcoming quarterly results.
The company's Bath & Body Works segment is gaining traction,
driven by a rise in store transactions, enhancement in the direct
channel business and new stores. Victoria's Secret Stores have been
performing well, and the company is also revamping its La Senza
Limited Brands intends to augment its retail footprint across
the globe by expanding aggressively in Canada and other
international markets. Moreover, the company's strong liquidity
positions it for growth as well as higher returns. However, stiff
competition and erratic consumer behavior still remain matters of
Currently, we have a long-term Neutral recommendation on the
stock. However, Limited Brands retains a Zacks #2 Rank that
translates into a short-term Buy rating.
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