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L Brands Pops 9% On Higher 1Q Profit Outlook, $500M Share Buyback

Shares of L Brands closed 8.9% higher on Friday after the apparel retailer raised its first-quarter EPS guidance and approved a share buyback plan of $500 million. The parent company of Victoria’s Secret also reinstated annual dividend payments and repaid $1.04 billion in debt.

L Brands (LB) now expects 1Q adjusted earnings to be in the range of $0.55-$0.65 per share, up from the earlier guidance of $0.35-$0.45 per share. Analysts were anticipating EPS of $0.55 per share in 1Q.

The company’s CEO Andrew Meslow said that the increased 1Q profit outlook reflects strong quarter-to-date performance, which boosted the overall quarterly outlook.

Additionally, L Brands announced a new share buyback plan of $500 million, which will replace the previous share repurchase program. Notably, the company has $79 million worth of shares remaining under the previously authorized program.

On top of this, L Brands resumed its dividend payments and said that it will begin to pay a quarterly dividend of $0.15 per share from June 2021. The annual dividend of $0.60 per share now reflects a dividend yield of 0.99%.

The company’s chairman Sarah Nash said, “The actions being announced today further support our effort to decrease leverage and enhance returns to shareholders, while better positioning the Bath & Body Works and Victoria’s Secret businesses for separation in August.” (See L Brands stock analysis on TipRanks)

Following the strategic business update, several analysts raised their price targets. B.Riley Financial analyst Susan Anderson raised the stock’s price target to $67 (10.2% upside potential) from $60 and maintained a Buy rating.

Overall, LB has a Moderate Buy consensus rating based on 9 Buys and 9 Holds. The average analyst price target of $62.24 implies upside potential of 2.4% to current levels, given the share price rally of about 210% in the last year.

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