Limited Brands (NYSE: LTD) announced its results for the first quarter on May 16, 2012. Limited Brands is a specialty retailer of women's apparel, beauty, and personal care products and accessories operating under various trade names.
In most situations, when earnings do not meet analyst estimates, a business' stock price will tend to drop. On the other hand, when actual earnings beat estimates by a significant amount, the share price will likely surge.SEE: 12 Things You Need To Know About Financial Statements
The Numbers:
Limited beat expectations with its latest EPS and revenue figures. The company reported 41 cents per share versus the 40 cents per share estimate and revenues of $2.15 billion versus the $2.14 billion estimate. Revenue fell 2.9% from the same period last year while EPS is down 18%. The company's net income for the quarter fell 24.5% to $124.6 million. This marks the second quarter in a row that the company's net income has fallen after profits tumbled 20.8% in the fourth quarter of the last fiscal year.
A Look Back:
Last quarter marked the fifth consecutive quarter of gross margins expanding, as the company's gross margin expanded 3.9 percentage points from the year-earlier quarter to 41.9%. During this time, margins have grown an average of 1.9 percentage points per quarter on a year-over-year basis.
Net income has increased 16.9% year-over-year on average across the last five quarters. The biggest gain came in the third quarter of the last fiscal year, when income climbed 54.1% from the year-earlier quarter.
Looking Ahead:
The outlook for the company's results in the upcoming quarter is unfavorable. The average estimate for the second quarter is 50 cents per share, down from 54 cents 90 days ago. When analyst increase earnings estimates investors can assume business has been stronger than first thought and is an encouraging sign for investors. A decreasing earning estimate is a negative sign and usually leads to a drop in the stock price. For the fiscal year, the average estimate has moved down from $2.92 a share to $2.83 over the last 90 days.
(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)
