On Wednesday, Bath & Body Works Inc. (NYSE:BBWI) received a vote of confidence from BMO Capital Markets, as the firm increased its price target on the company's shares to $55 from $50, while maintaining an Outperform rating.
The decision followed the company's performance in the first quarter, which included a revenue beat, improved gross margins (GM), growth in earnings before interest and taxes (EBIT), and reduced leverage.
The company's first-quarter results demonstrated what BMO Capital views as ongoing progress rather than unexpected turns. Despite the stock's recent rally, the analyst believes that Bath & Body Works is on a steady path of improvement.
The performance in the first quarter has provided the firm with a greater level of assurance in the company's second-half numbers and its potential for continued advancement.
According to the analyst, Bath & Body Works is showing signs of under-earning, suggesting that the valuation trough of the company should increase. The raised price target of $55 is approximately 14 times the forecasted earnings per share (EPS) for the fiscal year 2025.
The market's reaction to the company's first-quarter achievements may not have been as robust as some might have anticipated, given the stock's recent upward movement.
Nonetheless, BMO Capital's analysis points to a solid trajectory for Bath & Body Works, with expectations of the company's valuation reaching higher levels in the double-digit price-to-earnings (PE) range.
In summary, the upward revision of the price target by BMO Capital reflects a positive outlook for Bath & Body Works, underpinned by the company's first-quarter financial results and the anticipation of continued progress and valuation improvement.
InvestingPro Insights
Bath & Body Works Inc. (NYSE:BBWI) has been recognized for its financial performance and potential for growth. With a market capitalization of $10.1 billion and a P/E ratio standing at an attractive 13.35, the company's value proposition is clear. The adjusted P/E ratio for the last twelve months as of Q1 2025 even further emphasizes this point at 11.7, suggesting a more appealing valuation when considering the company's earnings.
An InvestingPro Tip highlights that BBWI is trading at a low P/E ratio relative to near-term earnings growth, which aligns with BMO Capital Markets' positive stance on the company's stock. Additionally, the company's commitment to shareholder returns is evident as it has maintained dividend payments for 52 consecutive years, with a current dividend yield of 1.77%. Moreover, the stock has seen a significant price uptick over the last six months, with a 28.7% total return, indicating strong investor confidence and market performance.
For those seeking a deeper understanding of Bath & Body Works' investment profile, InvestingPro offers additional tips and insights. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable resources. There are 7 additional InvestingPro Tips available for BBWI, offering more detailed guidance for potential investors.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.