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Has RH Stock Bottomed Out?

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Stock performance

As of September 27, RH (RH) was trading at $132.99, which represents a fall of 12.1% since the announcement of its second quarter of fiscal 2018 earnings release on September 4.

In its latest quarter, which ended on August 4, RH posted adjusted EPS of $2.05, outperforming analysts’ expectation of $1.74. However, its SSSG (same-store sales growth) and revenue fell below analysts’ expectation of 7.7%, coming in at 5%. Its revenues were $642.7 million, which was lower than analysts’ expectation of $661 million.

After posting its fiscal second-quarter earnings, RH management raised its EPS guidance and lowered its revenue guidance for 2018. Lower-than-expected sales in the fiscal second quarter and a lower revenue guidance led to a fall in the stock.

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Year-to-date performance

Despite the recent decline, RH has returned 54.3%, YTD (year-to-date), driven by a strong performance in the fiscal fourth quarter of 2017 and the fiscal first quarter of 2018.

In that same period, its peers Williams-Sonoma (WSM) and Bed Bath & Beyond (BBBY) have returned 26.7% and -32.4%, respectively. The SPDR S&P Homebuilders ETF (XHB), which has invested ~30% of its holdings in home improvement and furnishing companies, has fallen 12.6%.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for RH for the next four quarters. We’ll also look at management’s guidance for 2018. Finally, we’ll look at RH’s valuation multiple and analysts’ recommendations. Let’s start with analysts’ revenue expectations.

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