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RH Beat Analysts’ Earnings per Share Estimate in 4Q17

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4Q17 performance

RH (RH) posted EPS (earnings per share) of $0.01 in 4Q17. However, excluding special items, its adjusted EPS was $1.69, which represents a growth of 148.5% from $0.68 in 4Q16. Analysts were expecting the company to post EPS of $1.56.

RH’s EPS growth was driven by revenue growth, expansion of net margin, and share repurchases in the last 12 months. The company repurchased 20.2 million shares at an average price of $49.46 in 2017. Share repurchases reduce the number of shares outstanding, thus boosting EPS. From the above graph, you can see that RH has outperformed analysts’ EPS estimates three times in the last four quarters.

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Peer comparisons and outlook

In 4Q17, Williams-Sonoma (WSM) posted EPS growth of 8.4%. EPS for Bed Bath & Beyond (BBBY) is expected to fall 23.9%.

Outlook

RH’s management has set the company’s 2018 EPS guidance at $5.45–$6.20 with diluted shares outstanding of approximately 26.6 million. The guidance represents a growth of 125.2%–156.2% from $2.42 in 2017. For 1Q18, management is expecting the company to post EPS of $0.95–$1.05 with the number of shares outstanding at 25.5 million.

Analysts are expecting RH to post EPS of $5.86 in 2018, which represents a year-over-year growth of 142.1%. The growth is expected to be driven by revenue growth and expansion of net margins.

Next, let’s look at RH’s valuation multiple.

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