Will RH’s Q1 Earnings Boost Its Stock Price?


Jun. 11 2019, Updated 7:47 a.m. ET

Stock performance

As of June 10, RH (RH) was trading at $92.40—a fall of 30% since the announcement of its fourth-quarter earnings on March 28. The company was trading at a discount of 43.8% from its 52-week high of $164.49 and at a premium of 9.9% from its 52-week low of $84.11.

In the fourth quarter, RH reported an adjusted EPS of $3.00, which beat analysts’ estimate of $2.86. However, the company’s revenues of $671.82 million fell short of analysts’ expectation of $686.30 million. The weakness in RH’s core business, due to volatility in the market, was blamed for the lower-than-expected sales. The company’s management expects weakness in the high-end housing market to continue. RH lowered its revenue and EPS guidance for this year. Lower-than-expected sales in the fourth quarter and management’s lower guidance led to a fall in the stock price. The renewed trade war between the US and China contributed to the decline in the company’s stock price.

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YTD performance

RH has underperformed the broader equity markets this year. RH stock has fallen 22.9% YTD (year-to-date), while the S&P 500 Index has returned 15.1%. Williams-Sonoma (WSM) and Bed Bath & Beyond (BBBY) have returned 11.6% and 7.6%, YTD, respectively.

Valuation multiple

The decline in RH’s stock price since the announcement of its fourth-quarter earnings has lowered its valuation multiple. As of June 10, the company was trading at a forward PE ratio of 10.5x compared to 13.0x before the announcement of its first-quarter earnings. Williams Sonoma and Bed Bath & Beyond were trading at forward PE ratios of 11.9x and 6.0x on June 10, respectively.


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