RH (RH) Shares Touch A 52-Week High On Strong Prospects

Shares of RH (NYSE:RH) , formerly known as Restoration Hardware, scaled a new 52-week high of $48.91 on Apr 11. The luxury home furnishing relailer’s stock has risen 54.8% year to date, outperforming the Zacks classified Retail-Home Furnishing industry’s dip of 4.6%. In contrast, RH’s close rivals, Williams-Sonoma Inc. (NYSE:WSM) advanced 14.4% and Bed Bath & Beyond Inc. (NASDAQ:BBBY) dipped 3.1% year to date.



What’s Driving It?

Fiscal 2016 was tough for RH and the company’s financial results were hurt by its strategic investment. However, RH was able to transform itself from a promotional model company to a membership model company that led to a decline in earnings as well as its share price.

Shares of RH increased more than 25% following its fourth-quarter fiscal 2016 results on Mar 28. It was the third successive quarter of earnings beat. Moreover, investors’ optimism about the performance of the company in the coming quarters received a boost after it provided impressive first-quarter and fiscal 2017 guidance. Management expects that the changes to the business will deliver fruitful results in fiscal 2017 and beyond.

New business initiatives like RH Modern, RH Teen, the redesign of RH Interiors Source Book, RH Hospitality, the roll out of Design Ateliers in retail Galleries, as well as the introduction of Waterworks to the company’s platform are expected to fuel growth in fiscal 2017 and beyond.

RH management expects the company’s fiscal 2017 revenues to be in the range of $2.3–$2.4 billion, which represents a rise of 7.6%–12.2%. The Zacks Consensus Estimate for revenues is pegged at $2.36 billion, which represents a year-over-year rise of 10.5%.

Adjusted earnings per share for fiscal 2017 are projected to be in the range of $1.78–$2.19, well above the 2016 figure of $1.27.

For first-quarter fiscal 2017, RH expects revenues in the range of $530–$545 million, indicating a year-over-year growth of 16–20% which includes five points gain due to the acquisition of Waterworks and another five points owing to the higher outlet and warehouse sales. Excluding these factors, the company anticipates revenues growth in the range of 6–10%. Earnings per share for first quarter are expected to be in between 2 cents and 6 cents. In first-quarter fiscal 2016, the company had reported loss per share of 5 cents.

Overall, improving U.S. economy along with the rise in the housing price index is expected to contribute to RH’s 2017 results.

Zacks Rank & Key Pick

RH currently carries a zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

A better-ranked stock in the Retail-Wholesale sector includes Fastenal Company (NASDAQ:FAST) carrying a Zacks Rank #2 (Buy).

Fastenal is expected to register 7.7% earnings per share growth this year.

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Restoration Hardware Holdings Inc. (RH): Get Free Report

Williams-Sonoma, Inc. (WSM): Free Stock Analysis Report

Bed Bath & Beyond Inc. (BBBY): Free Stock Analysis Report

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