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Can RH be Able to Retain Beat Streak This Earnings Season?

RH RH is scheduled to report second-quarter fiscal 2021 (ended Jun 31, 2021) results on Sep 8, after market close.

In the last reported quarter, this leading luxury home furnishing retailer’s earnings surpassed the Zacks Consensus Estimate by 16.4%. Markedly, the company beat earnings expectations in each of the last four quarters, with the average being 19.8%. The metric also increased 285% from the year-ago level. Also, its net revenues topped expectation by 13.8% and grew 78% year over year.

Trend in Estimate Revisions

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved upward to $6.58 from $6.54 over the past seven days. The estimated figure indicates an increase of 34.3% from $4.90 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $972.3 million, suggesting 37% growth from the year-ago reported figure of $709.7 million.

RH Price and EPS Surprise

RH price-eps-surprise | RH Quote

Factors to Note

Strengthening housing market and rising demand for high-end furniture among affluent consumers in the solid luxury home market (particularly for large suburban homes) are likely to have proved conducive to RH’s earnings and revenues in the fiscal second quarter.

The company has been working on various strategies to elevate and enhance the RH brand image. Also, it has been transforming the entire business into a digital platform via The World of RH — a portal presenting the company’s products, places, services and spaces. Its digital experience — including RH Interiors, Modern, Outdoor, Baby & Child plus Teen — has been significantly adding strength to the company as it generates strong online revenues, while Source Books drives traffic to Galleries and websites.

Meanwhile, RH has been working on cost-saving initiatives such as redesigning the supply chain, reducing inventory, improving product margins and so on. Management expects these initiatives to be reflected on fiscal second-quarter earnings and margin expansion. Also, more pricing power is expected to have boosted gross margins, while SG&A expenses are likely to have remained under control as the company limited advertising due to supply chain constraints.

Overall, it expects second-quarter fiscal 2021 revenues to grow in the range of 35-37% and adjusted operating margin within 25.9-26.1%.

Although the economy has been rebounding from COVID-19 impacts, retailers are still grappling with the effects of the same. Disruption across the global supply chain owing to the pandemic is anticipated to have been a cause of concern. Also, rising raw material costs may have been a risk.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: The company has an Earnings ESP of +0.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: RH — which shares space with Tempur Sealy International, Inc. TPX in the Zacks Retail - Home Furnishings industry — currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Williams-Sonoma Inc. WSM reported solid second-quarter fiscal 2021 results. The company’s earnings and revenues handily beat the Zacks Consensus Estimate and significantly increased year over year, courtesy of strength across all brands along with accelerated e-commerce growth.

GMS Inc. GMS reported impressive results for first-quarter fiscal 2022, wherein earnings and revenues topped the Zacks Consensus Estimate. Also, the metrics increased on a year-over-year basis.

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Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

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Tempur Sealy International, Inc. (TPX): Free Stock Analysis Report
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