Haverty Furniture Companies Inc. (HVT) hit a 52-week high on October 11, shortly after announcing strong third quarter sales. Shares of this home furnishing company have been rising since its 10-fold earnings surprise in the second quarter. In fact, the stock is up nearly 38.3% since August 1.
This Zacks #1 Rank (Strong Buy) has been gaining traction due to its strong sales trends, encouraging outlook, enhanced product assortments and customer centric initiatives, along with efforts to boost gross margins and curtail operating costs. Haverty Furniture will be reporting quarterly results again on October 31.
Third Quarter Sales Surge
On October 4, Haverty Furniture reported net sales of $172.7 million for the third quarter, a gain of 11.1% from the year-ago quarter. Comparable store sales for the quarter rose 10% over the year-ago period.
Second Quarter 2012 Profits Up
On August 11, Haverty Furniture posted second-quarter earnings of 11 cents per share, soaring past the Zacks Consensus Estimate of 1 cent. This compared favorably with the company's year-ago loss per share of 4 cents.
Net sales increased 5.9% year over year to $151.5 million, driven by a 5.6% increase in comparable store sales. The Zacks Consensus Estimate was at $152 million.
Gross profit margins expanded 130 basis points to 52.6%, driven by a 160 basis points contraction in selling, general and administrative costs, as a percent of sales. However, selling, general and administrative costs in dollar terms increased 2.7% year over year to $76.4 million, primarily due to variable selling costs including commissions and incentive compensation.
Looking ahead, the company expects gross margin to be about 52% in the second half of 2012. Selling square footage is expected to increase 2.5% in 2012 driven by the opening of new stores in Maryland, Texas and Atlanta through the rest of the year. Capital expenditure is projected to be $23.5 million in 2012.
Earnings Momentum Trends Upward
The Zacks Consensus Estimate for 2012 grew nearly 7.7% to 56 cents per share in the last 30 days, representing a year-over-year surge of 825.0%. The Zacks Consensus Estimate for 2013 advanced 4.9% to 85 cents per share over the same time frame, signifying a year-over-year improvement of about 52.3%.
For the soon-to-be announced third quarter, the Zacks Consensus Estimate is at 12 cents per share, which is up 2 cents in the past 30 days.
Haverty Furniture currently trades at a forward P/E of 26.9x, a significant premium to the peer group average of 18.2x. On a price to book basis, however, shares reflect a 40.8% discount to the peer group with a trading multiple of 1.22. Similarly, the price-to-sales ratio reflects a discount of 57.1% to the peer group, with shares trading at a multiple of 0.51.
The chart below indicates a steady growth in the company's share price since reporting second quarter 2012 results, reflecting an upside of about 38.3%. Currently trading close to its 52-week high, shares of Haverty Furniture have continually outperformed the 50 and 200-day moving averages since almost mid-August this year.
Moreover, the company has outperformed the S&P 500 Index since August 22, 2012. Haverty Furniture has a market cap of $328.6 million, while average daily trade volume is 43K.
Haverty Furniture Companies Inc. is a full-service home furnishings retailer operating mainly in the Southern and Midwestern regions of the United States. Haverty Furniture provides its customers with a wide selection of furniture and accessories primarily in the middle to upper-middle price ranges. As an added convenience to its customers, the company offers financing through a revolving charge credit plan. The company sells products through its 120 showrooms in 17 states as well as on the Internet. The company was founded in 1885.
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