On Tuesday, Bath & Body Works Inc. (NYSE:BBWI) saw its price target reduced to $35 from the previous $48 by a Citi analyst while the firm maintained a Neutral rating on the stock. The adjustment comes ahead of the company's second-quarter earnings report, which is scheduled to be released on August 28 before the market opens.
The analyst anticipates Bath & Body Works will post second-quarter earnings per share (EPS) of $0.35, which is slightly below the consensus estimate of $0.36. Sales are expected to decline by 2%, which is a bit more than the consensus forecast of a 1% drop. The gross margin is projected to be in line with consensus estimates.
The performance of Bath & Body Works in the second quarter is expected to be challenged by factors such as the Semi-Annual Sale in June, which focuses less on new product introductions to drive customer traffic. Additionally, increased price sensitivity among consumers likely led to higher promotions and limited gross margin upside.
The analyst also predicts that management will revise its full-year 2024 guidance to the lower end of the current $3.00 to $3.35 range and may no longer forecast a sales rebound in the second half of the year. This outlook is based on the observation that the stock has declined by 35% since early June and is currently trading at a price-to-earnings (P/E) multiple of approximately 10 times the firm's reduced full-year 2024 earnings estimate.
Despite the recent downturn in investor sentiment reflected in the stock's performance, the analyst remains cautious. The expectation that management may not project a sales increase in the future could make it challenging for the stock to gain traction following the second-quarter earnings report.
In other recent news, Bath & Body Works has reported significant developments. The company's first-quarter earnings for fiscal 2024 exceeded expectations, with earnings per diluted share (EPS) rising to $0.38, a 15% increase from the previous year. Net sales reached $1.4 billion, despite a marginal decline of 0.9%, surpassing company forecasts. Piper Sandler adjusted its outlook on shares of Bath & Body Works, lowering the price target to $39 from the previous $47, while keeping a Neutral rating on the stock. BMO Capital maintained its Outperform rating on Bath & Body Works, with a steady price target of $55.00.
TD Cowen also upheld its Buy rating for Bath & Body Works, highlighting the company's successful emphasis on new products. Bath & Body Works made amendments to its corporate bylaws and held its annual stockholder meeting, during which ten directors were elected to the company's board, and Ernst & Young LLP was ratified as the independent registered public accounting firm for the fiscal year 2024.
InvestingPro Insights
As Bath & Body Works Inc. (NYSE:BBWI) approaches its second-quarter earnings report, InvestingPro data shows a market capitalization of $7.65 billion and a P/E ratio of 8.79, indicating the stock is trading at a low multiple relative to near-term earnings growth. This aligns with the Citi analyst's observation of the stock trading at approximately 10 times the firm's reduced full-year 2024 earnings estimate. Furthermore, the company's price has seen significant movement, with an 8.42% return over the last week, despite a notable 32.09% decline over the last three months. This volatility is a critical factor for investors to consider.
InvestingPro Tips suggest that Bath & Body Works has a high shareholder yield and has maintained dividend payments for 52 consecutive years, with a current dividend yield of 2.34%. These factors may be of interest to income-focused investors, especially in light of the company's liquid assets exceeding short-term obligations.
For those interested in a deeper analysis, InvestingPro offers additional tips on the company's financial health and performance. There are 10 more InvestingPro Tips available, which can provide investors with a more comprehensive understanding of Bath & Body Works' potential investment value. To explore these insights, visit https://www.investing.com/pro/BBWI.
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