RH Analysts Raise Estimates After Q1 Beat-And-Raise

Restoration Hardware Holdings, Inc RH shares continued to spike Thursday, jumping more than 20% after the furniture retailer issued strong full-year guidance Wednesday and dismissed tariff concerns, leading analysts to boost their earnings estimates. 

RH raised its 2019 outlook fairly dramatically, with the high end of the EPS estimate going from $8.69 to $9.27, and boosted its 2019 sales growth forecast from 3-5% to 5-6%.  

RH said it continues to target 8-12% annual revenue growth, with operating margins in the mid-to-high teens and return on invested capital above of 50%.

The Analysts

Wells Fargo’s Zachary Fadem reiterated an Outperform rating on RH and lowered the price target from $160 to $150.

KeyBanc Capital Market's Bradley Thomas maintained a Sector Weight rating.

The Takeaways 

Both analysts raised estimates to reflect the bullish guidance and strong first-quarter results.     

“RH appears to be back,” Wells Fargo's Fadem said in a Wednesday note. 

The company’s strong March — and RH’s assertion that it anticipates little impact from the Sino-American tariff battle — give the stock a good look in a tough industry, he said.

“While volatility likely persists as the furnishings category remains out of favor (33% short interest), we believe (Wednesday’s) print vastly improves the narrative, and at 12x P/E, we see an attractive entry point for patient investors." 

KeyBanc’s Thomas was less bullish, saying he remains neutral on the stock in the near-term, while acknowledging a more positive long-term outlook.

A mid-teens margin and EPS above $20 are achievable, the analyst said. 

“We continue to view RH as a compelling, long-term growth story, but recommend investors stay selective and opportunistic in the highly competitive furniture/furnishings industry." 

Price Action

RH shares were rallying by 18.24% to $112.03 at the time of publication Thursday. 

Related Links:

Restoration Hardware Analyst Neutral After Q4 Print, Sees 'Widening Competitive Moat'

Mid-Morning Market Update: Markets Open Higher; RH Earnings Beat Estimates

Photo by Restoration Hardware via Wikimedia.