Analysts, Option Traders Chime in After L Brands' Earnings

A costly split of the firm's two brands may be putting pressure on the shares

Digital Content Manager
May 20, 2021 at 10:40 AM
facebook twitter linkedin

L Brands Inc (NYSE:LB) has reversed course this morning, dipping into the red after a brief pop early in the session. The company just posted first-quarter earnings of $1.25 on $3.02 billion in revenue -- handily topping analysts' estimates. The Victoria's Secret and Bath & Body Works parent said the quarterly beat was driven by stronger sales for its full-price items, though it declined to share any type of forecast ahead of its recently announced company spinoff. This spinoff looks like it could cost LB a pretty penny. The firm said the split itself could cost as much as $370 million over the next couple years, and roughly $80 million in annual expenses for both brands. 

The equity is distancing itself further from its May 18 record high of $71.99, extending yesterday's bear gap. This pullback is now testing its footing at the 40-day moving average which has provided a near constant layer of support for the better part of a year. In fact, within the past 12 months, LB has added an impressive 450%, and sports an 80.9% year-to-date lead. 

Analysts are brushing off this negative earnings reaction. So far, LB has received four price-target hikes, including one from UBS to $96. Now, the 12-month consensus price target stands at $76.90 -- representing a 17.3% premium to current levels. Digging deeper, nine analysts covering the equity called it a "buy" or better coming into today, while eight said "hold." 

Option traders are leaning bullish today as well. Within the first hour of trading, 3,542 calls and 2,704 puts have been exchanged -- triple the intraday average. The two most popular contracts are the May 70 and 68 calls, with positions being opened at the latter. 


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 



Special Offers from Schaeffer's Trading Partners