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Restoration Hardware (RH) Soars 9.1%: Is Further Upside Left in the Stock?

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RH RH shares soared 9.1% in the last trading session to close at $529.08. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 4.7% loss over the past four weeks.

The increased optimism can be attributed to RH’s better-than-expected results for fourth-quarter of fiscal 2020. This leading luxury retailer in the home furnishing space reported solid quarterly results on the back of strong demand and solid margins. Both adjusted earnings and revenues handily beat the Zacks Consensus Estimate and grew on a year-over-year basis. RH witnessed a 36% increase in core demand for the fiscal fourth quarter. For February and the first two weeks of March, the same was up 73% and 96%, respectively, year over year. The company’s total demand was up 29% in the quarter.

Price and Consensus

Price Consensus Chart for RH
Price Consensus Chart for RH

This furniture and housewares company is expected to post quarterly earnings of $2.80 per share in its upcoming report, which represents a year-over-year change of +120.5%. Revenues are expected to be $614.65 million, up 27.3% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Restoration Hardware, the consensus EPS estimate for the quarter has been revised 3.7% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on RH going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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