Tic-tac-toe, investors want to know: After beating earnings estimates in each of the past two quarters, can Limited Brands (NYSE: LTD) make it three in a row when it reports its fiscal Q4 and full-year 2007 numbers on Wednesday?

What analysts say:

  • Buy, sell, or waffle? Nineteen analysts follow Limited. Six of them say to buy it, and the other 13 advise holding. In Motley Fool CAPS, this stock earns three stars out of five.
  • Revenue. On average, they expect to see quarterly sales fall 19% to $3.27 billion.
  • Earnings. Profits are predicted to slide 16% to $0.91 per share.

What management says:
January was a rough month for retailing. Wal-Mart (NYSE: WMT) reported just half a percent of same-store sales gains (excluding gasoline sales). Target's (NYSE: TGT) same-store sales declined 1.1%. J.C. Penney (NYSE: JCP) was down 1.9%, but Ann Taylor (NYSE: ANN) got away with flat comps.

For its part, Limited fessed up to an 8% slip in comps for both January and the fourth quarter. Total sales for the fourth quarter declined more than the 19% that analysts had predicted.

What management does:
Much like the decline in sales per se, Limited has been posting steadily deteriorating profits on those sales. Rolling gross margins have fallen for four quarters straight now, although operating and net margins appear to be reviving slightly thanks to lower selling, general, and administrative expenses, and gains on the sale of assets, respectively.

Margins

7/06

10/06

2/07

5/07

8/07

11/07

Gross

37.1%

37.7%

37.6%

36.9%

36.1%

35.4%

Operating

10.9%

11.1%

11%

10.1%

9.4%

9.6%

Net

7.3%

7.4%

6.3%

5.8%

7%

7.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

Two Fools say:
Despite Limited's less than stellar third-quarter results, the Inside Value and Income Investor teams remain bullish about the company's long-term prospects. Based on weaker cash flow prospects, however, the Inside Value team reduced its estimate of intrinsic value. But selling at a P/E of just nine times trailing earnings, this stock looks pretty cheap to me.

Related Foolishness:

Limited Brands has been recommended by both Income Investor and Inside Value. Get more details from the analysts from either service with a free 30- day trial.

Fool contributor Rich Smith does not own shares of any company named above. Wal-Mart is an Inside Value recommendation. The Motley Fool has a disclosure policy.