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Why RH Stock Rose in 3Q17

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3Q17 performance

RH (RH), previously known as Restoration Hardware, posted its 3Q17 earnings after the market closed on December 5, 2017, reporting adjusted EPS (earnings per share) of $1.04 on revenues of $592.5 million.

Stock performance

RH’s 3Q17 earnings were in line with the analysts’ expectations. Analysts were expecting the company to post EPS of $1.04 on revenues of $592.6 million. After posting strong 3Q17 earnings, RH’s management expects its net earnings for 4Q17 to be in the range of $37 million–$41 million, which represents growth in the range of 32.5%–46.8% compared with 4Q16.

For 2018, analysts expect RH’s net margins to be in the range of $125 million–$145 million. The management’s optimistic outlook appears to have boosted investor confidence, leading to a rise in the company’s stock price.

As of December 7, 2017, RH was trading at $105.78, which represents growth of 1.8% since the announcement of its 3Q17 earnings.

Year-to-date performance

So far, 2017 has been a year of execution, architecture, and cash for RH, as it has moved away from a promotional model company to a membership model in 2016. Since the beginning of 2017, RH’s stock price has risen 250.9%. During the same period, peers Williams-Sonoma (WSM) and Bed Bath & Beyond (BBBY) have returned 10.6% and -44.5%, respectively.

Notably, the SPDR S&P Homebuilders ETF (XHB) and the S&P 500 Index (SPX) have returned 27.9% and 17.8%, respectively, year-to-date.

Series overview

In this series, we’ll assess RH’s 3Q17 earnings call and compare its 3Q17 performance with the analysts’ estimates. We’ll also cover the management’s guidance for 2017 and 2018 as well as the analysts’ expectations for the next four quarters, wrapping up the series up with a look at RH’s valuation multiple and its analyst recommendations.

Next, we’ll examine RH’s 3Q17 revenue.

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