Citi has raised its rating on Bath & Body Works to Buy from Neutral ahead of the company’s second-quarter earnings release next week, citing a combination of factors the bank says create "a very attractive risk/reward" heading into the print.
In premarket trading on Tuesday, Bath & Body Works shares rose more than 2% on the upgrade.
The brokerage models second-quarter adjusted earnings per share of $0.26 for the company, which is above the consensus analyst estimate of $0.24 and also higher than the company’s own guidance range of $0.20 to $0.25. Citi’s analysts highlighted the retailer’s recent Fruit Fusion product collection as a probable success, saying that the collection should bolster management’s confidence as it introduces additional new products and marketing initiatives into the second half of the year.
Citi said it is keeping its full-year 2026 estimates unchanged, but it flagged potential upside that could materialize from two cost-related sources. First, lower energy prices since the company last reiterated guidance in the first quarter could improve margins. Second, the firm noted the possibility of tariff refunds as another source of incremental upside. At the same time, Citi does not anticipate any revisions to Bath & Body Works’ second-half revenue outlook.
The bank maintained a price target of $25 for the retailer and observed that the stock is trading at 5.1 times its forecast 2026 EBITDA. Citi described the stock’s risk/reward as attractive both into the upcoming second-quarter results and over the next 12 months.
Market context and outlook
Citi’s upgrade reflects a view that a combination of an expected quarterly earnings beat, a depressed share valuation and potential cost recoveries could lead to near-term upside for the stock. The firm’s unchanged full-year estimates suggest it is not assuming material changes to the company’s operating plan for 2026, while the callouts for energy prices and tariff refunds indicate sources of possible incremental earnings improvement rather than confirmed gains.
Investors will be watching the upcoming quarterly report for confirmation of Citi’s forecast and for management commentary on product reception, marketing plans and any updates on cost-related items cited by the bank.