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Limited Brands Inc. (LTD), a specialty retailer of women’s intimate and other apparel, beauty and personal care products, recently posted fourth-quarter 2010 results.

Street analysts had nearly a week to ponder the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation for the stock.

Earnings Report Review

Limited Brands’ quarterly earnings of $1.26 per share came a penny ahead of the Zacks Consensus Estimate, but rose 24.8% from $1.01 earned in the prior-year quarter riding on the improving sales environment. The quarterly earnings also came well ahead of the company’s guidance range of $1.02 to $1.17 per share.

Management now forecasts fiscal 2011 earnings between $2.15 and $2.35 per share. Limited Brands projected first-quarter 2011 earnings in the range of 26 cents to 31 cents.

Limited Brands, which competes with Gap Inc. (GPS) and Hanesbrands Inc. (HBI), posted net sales of $3,455.9 million that climbed 12.8% from the prior-year quarter and outdid the Zacks Consensus Estimate of $3,397 million. The improvement can be credited to consumers, who cut back their discretionary spending during the recession are now gradually loosening their wallets.

Comparable-store sales for the quarter jumped 10%, reflecting a sharp rise from a 1% spike registered in the year-earlier quarter. Comparable-store sales rose 10% in November 2010, 5% in December 2010 and 24% in January 2011. Limited Brands now expects February 2011 comparable-store sales to rise in the high single-digit range compared with flat to up low single digits projected earlier.

Limited Brands now expects comparable-store sales to grow 2% to 4% for the first quarter and up low single digit for fiscal 2011.

Agreement of Estimate Revisions

Clearly, a positive sentiment is palpable among analysts, who remain optimistic about Limited Brands’ performance. Following the earnings release, the Zacks Consensus Estimates have been rising with analysts remaining bullish on the stock given healthy comparable-store sales trends and better-than-expected fourth-quarter 2010 results.

In the last 7 days, 6 out of 16 analysts covering the stock increased their estimates with none lowering their estimates for first-quarter 2011. For second-quarter 2011, 6 analysts revised their estimates in the upward direction, and none chopped their estimates in the last 7 days.

For fiscal 2011 and 2012, 8 and 3 analysts, respectively, have increased their estimates in the last 7 days, with only 1 analyst lowering the projection for fiscal 2011 and 2012.

Magnitude of Estimate Revisions

In the last 7 days, the Zacks Consensus Estimate for fiscal 2011 rose by 2 cents to $2.27, and for fiscal 2012 the Estimate climbed by a penny to $2.58.

For first-quarter 2011, the Zacks Consensus Estimate jumped by a penny to 30 cents, and for second-quarter 2011 it inched up by a penny to 41 cents a share in the last 7 days.

The estimates in the current Zacks Consensus for first-quarter 2011 range from a low of 28 cents to a high of 31 cents. For fiscal 2011, the estimates range from $2.15 to $2.41.

Our View

Limited Brands’ sustained focus on cost containment, inventory management, and merchandise initiatives has kept it afloat in a sluggish retail environment, as evident from its fourth-quarter 2010 results. The company’s Bath & Body Works segment is gaining traction, driven by a rise in store transactions, enhancement in the direct channel business and growth in new stores.

Victoria’s Secret Stores has been performing well, and the company is constantly revamping its La Senza brand. Limited Brands is keen to enhance its retail footprint across the globe by expanding aggressively in Canada and other international markets. However, stiff competition and erratic consumer behavior remain matters of concern.

Currently, we have a long-term Neutral rating on Limited Brands, which operates 2,968 stores. The Zacks #3 Rank, which translates into a short-term Hold recommendation, also correlates with our long-term view.

Source: Earnings Scorecard: Limited Brands