In the first quarter, RH (RH) outperformed analysts’ same-store sales growth, revenue, and EPS expectations. Following an impressive first-quarter performance, the company’s management raised its revenue and EPS guidance for 2019. The strong first-quarter performance and improved guidance appear to have prompted analysts to raise their price targets. Since the announcement of its first-quarter earnings, Telsey Advisory Group has hiked its price target from $125 to $130, while J.P. Morgan has raised its price target from $130 to $140. However, Citigroup has cut its price target from $157 to $148.
Overall, analysts favor a “hold” rating for the stock with 57.1% of the 21 analysts that follow the company giving it a “hold” rating, while 38.1% are recommending a “buy” rating, and the remaining 4.8% are advocating a “sell” rating. On average, analysts have a 12-month price target of $136.21 for RH, which implies an upside potential of 14.6% from its stock price of $118.87 on July 1.
Analysts expect RH to report revenue of $2.65 billion in 2019, which implies a rise of 5.6% from $2.51 billion in 2018. For the same period, analysts expect its EPS to rise by 6.5% to $9.10. RH’s EPS growth has been projected to be driven by revenue growth, an improvement in EBIT margin, lower interest expenses, and a decline in the number of shares outstanding due to share repurchases.
Since RH reported impressive first-quarter earnings, its stock price has increased by 25.3%. The surge in RH’s stock price has also raised its valuation multiple. As of July 1, the company was trading at a forward PE multiple of 12.5x compared to 10.8x before the announcement of its first-quarter earnings. In comparison, RH’s peers Williams-Sonoma (WSM) and Bed Bath & Beyond (BBBY) were trading at a forward PE multiple of 13.6x and 5.6x, on the same day, respectively.
Also, on July 1, RH was trading at 13.1 times analysts’ 2019 EPS estimate of $9.10, and 11.7 times analysts’ 2020 EPS estimate of $10.16 with its EPS expected to rise by 6.5% in 2019 and 11.7% in 2020.
Williams-Sonoma reported its first-quarter results on May 30. Since then, the company’s stock has surged ~25%. If you are interested in knowing more about the surge in WSM’s stock price, you can read Williams-Sonoma Is Up ~25% since Its Last Earnings: What’s Next?