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Bull of the Day: HAVERTYS (HVT)

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Tracey Ryniec
·4 min read
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HAVERTYS (HVT) is cashing in on the big push to "nest" during the pandemic. This Zacks Rank #1 (Strong Buy) recently paid out a special dividend and also raised its regular quarterly dividend.

HAVERTYS is a furniture retailer with 120 showrooms in 16 states in the South and Midwest. Established in 1885, this small cap company with a market cap of $495 million, specializes in the middle to upper-middle price ranges.

Special Dividend and an Increase in the Quarterly Dividend

On Nov 6, HAVERTYS announced that it would pay out a special dividend of $2.00 per share to those holding the common stock.

But, additionally, it raised its quarterly cash dividend to $0.22 per share.

That is currently yielding 3.2%.

The special and quarterly dividend were paid to shareholders on Dec 9, 2020.

HAVERTYS has paid a cash dividend every year since 1935.

Big Beat in the Third Quarter

On Oct 28, HAVERTYS reported its third quarter results and blew by the Zacks Consensus Estimate by 61.7%. Earnings were $0.97 compared to the consensus of $0.60.

Furniture has been one of the strongest retail categories in 2020.

Sales rose 3.9% to $217.5 million, up from $209.3 million in the third quarter of 2019.

Comparable store sales increased 4%.

Total written sales were up 22.8% while written comparable store sales rose 22.6%.

Gross profit margins also increased by 270 basis points to 56.2% from 53.5% in the year ago quarter.

The company has seen record business since reopening in May.

In the third quarter, it saw increases in all sales and key financial metrics over 2019 even while the coronavirus continued to impact production and they had supply chain impacts.

Hot Furniture Market Expected to Continue

The focus on the home isn't going away.

HAVERTYS noted that customer deposits were up 193.5% from Dec 31, 2019, as of the end of October, and they weren't experiencing any appreciable increase in cancelled sales.

The analysts are convinced of the trend as well.

The 2020 Zacks Consensus Estimate has moved up to $1.42 from $0.96 over the last 2 months. That's earnings growth of 21.4% over 2019 as the company only made $1.17 last year.

The story is expected to be much the same for 2021.

The 2021 Zacks Consensus Estimate has jumped to $1.70 from $1.20 in the last 60 days. That's another 19.7% earnings growth.

Shares at 5-Year Highs

After trading in a narrow trading range for years, HAVERTYS shares have finally broken out to new 5-year highs.

Shares are up 37% year-to-date.

They're no longer as cheap as they once were. They now trade with a forward P/E of 19.1.

But they're still paying out that generous dividend and they bought back $12.9 million in shares in the quarter with another $16.8 million authorized in the stock repurchase program.

Furniture retailers are negotiating the supply and demand metrics of the global pandemic well. The industry is in the top 13% of Zacks Ranked Industries.

Williams-Sonoma (WSM) is currently the only other Zacks Rank #1 (Strong Buy).

For an investor looking for a way to play the nesting trend, HAVERTYS is one to keep on the short list.

[In full disclosure, Tracey owns shares of WSM in her personal portfolio.]

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