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On Friday, Citi analyst Paul Lejuez maintained a Neutral rating on Bath & Body Works Inc. (NYSE:BBWI) with a steady price target of $40.00. Lejuez anticipates that the company will surpass fourth-quarter earnings per share (EPS) expectations, projecting a $2.07 result compared to the consensus estimate of $2.04. This forecast is attributed to marginally higher sales than anticipated. The analyst noted that the fourth quarter likely represents the second consecutive quarter of sales outperformance for Bath & Body Works, owing to more effective marketing strategies, product offerings, and diminishing challenges in the home fragrance category.
Lejuez expects management to set a cautious outlook for fiscal 2025, with predictions of low single-digit sales growth, suggesting nearly flat comparable store sales, and stable EBIT margins. This outlook implies an EPS range of $3.40 to $3.50, which falls short of the consensus estimate of $3.67. The company maintains healthy fundamentals with a 44% gross profit margin and generated $7.43 billion in revenue over the last twelve months. Despite this conservative guidance, the analyst points out that first-quarter trends to date are positive, bolstered by a recent collaboration with Disney (NYSE:DIS) in February and a comparison to the previous year’s period, which was impacted by operational missteps.
The analyst believes that clear indicators of sustained top-line growth and the potential for sales to exceed the anticipated conservative guidance for fiscal 2025 will be crucial. These factors could determine the trajectory for EBIT margin growth. Nonetheless, due to the expected prudent guidance and high expectations leading up to the earnings report, Lejuez sees a balanced risk/reward scenario in the lead-up to the fourth-quarter EPS announcement. InvestingPro analysis suggests the stock is currently undervalued, with additional insights and a comprehensive Pro Research Report available for deeper analysis of Bath & Body Works’ financial health and growth prospects.
In other recent news, Bath & Body Works has been in the spotlight with several significant developments. First, JPMorgan upgraded the company’s stock rating from Neutral to Overweight, increasing the price target to $47.00 from $41.00. This upgrade reflects a positive outlook on the company’s revenue and earnings prospects, supported by conversations with management and research indicating potential growth in the fiscal year 2025. Additionally, Bath & Body Works announced a change in its executive team, with Chief Human Resources Officer Deon Riley set to depart by early 2025 as part of an orderly transition process.
In a strategic financial move, the company plans to redeem all remaining 9.375% Senior Notes due 2025, with the redemption set for January 30, 2025. Goldman Sachs reiterated a Buy rating, maintaining a price target of $52.00, citing stable sales trends and ongoing initiatives aimed at driving growth. These initiatives include new collaborations, increased marketing, and expansion into new product categories. Meanwhile, TD Cowen also maintained a Buy rating and raised the price target to $48.00, naming Bath & Body Works as their Best Idea for 2025. The firm highlighted the company’s strong operating margins and free cash flow, projecting earnings per share of $3.65 for fiscal year 2025.
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