Victoria's Secret (VSCO) is likely to post a marginal Q3 earnings beat when it reports its quarterly results next month, UBS said in a note emailed Tuesday.

The firm is forecasting a $0.02 Q3 EPS beat for Victoria's Secret and said it expected a small fiscal 2024 operating guidance increase.

UBS said its research indicated that the company's crowding score had turned to a positive 3.1, but was still short-crowded when compared to its peers' 4.4 average.

"These data points indicate sentiment leans more bullish than bearish. Our conversations with investors suggest some have become more optimistic on [Victoria's Secret's] turnaround and potential fiscal 2025 EPS acceleration," the firm wrote.

Q3 estimates imply $1.90 to $2.05 earnings per share for the year as opposed to a previous range of $1.75 to $2.00.

UBS said the options market was pricing a 17.3% change in the stock's price in either direction following the earnings release versus a 7.7% historical average move. "We expect less volatility than +/-17.3%."

The firm changed its price target for Victoria's Secret to $18 from $13 and reiterated sell rating.

Price: 36.12, Change: -0.46, Percent Change: -1.26