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RH Queued for Q2 Earnings: Key Factors to Take Into Account

·5 min read

RH RH is scheduled to report second-quarter fiscal 2022 (ended Jul 30, 2022) 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 42.5%. The company beat earnings expectations in each of the last four quarters, with the average being 19.2%. The reported figure also increased 59.1% from the year-ago level. RH’s net revenues topped expectations by 3.5% and grew 11.2% year over year.

Trend in Estimate Revisions

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved downward to $6.82 from $6.84 over the past 30 days. The estimated figure indicates a decrease of 19.6% from $8.48 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $9708 million, suggesting 1.8% growth from the year-ago reported figure of $988.9 million.

RH Price and EPS Surprise

RH Price and EPS Surprise
RH Price and EPS Surprise

RH price-eps-surprise | RH Quote

Factors to Note

RH’s business activities are directly tied to housing market conditions. Higher mortgage rates are taking a toll on the housing sector and so on the furnishing market as well. Consequently, on Jun 29, 2022, RH revised its fiscal 2022 outlook, mainly for the second half of fiscal 2022, to take into account the softening demand trends.

Given the macroeconomic conditions and current business trends, RH expects fiscal second-quarter net revenues to fall 1-3%. The adjusted operating margin is projected to grow in the 23-23.5% range. In the year-ago period, it generated net revenue growth of 39% and an adjusted operating margin of 26.6%. The quarterly outlook remains unchanged, mainly owing to faster backlog relief offsetting lower-than-expected demand.

Nonetheless, RH’s clients in the higher-income section are expected to show better performance considering the fact that this section is less price sensitive than the larger market.

Besides, the company has been working on various strategies to elevate and enhance the RH brand image, which is expected to show in the to-be-reported quarter. 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, with Source Books driving 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. Also, greater pricing power is expected to have aided gross margins to some extent, while SG&A expenses are likely to have remained under control as the company limited advertising due to supply-chain constraints.

Overall, 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. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: The company has an Earnings ESP of +4.24%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: RH 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 impressive earnings for second-quarter fiscal 2022 (ended Aug 1, 2022). The company’s earnings and revenues beat the Zacks Consensus Estimate and improved on a year-over-year basis, courtesy of strength across all brands, along with the success of growth initiatives.

Non-GAAP earnings of $3.87 per share increased 19.4% from $3.24 per share reported a year ago. Revenues of $2.14 billion grew 9.7% year over year. The impressive revenues were driven by strong growth across all brands.

Builders FirstSource BLDR released its second-quarter 2022 results, wherein it reported 12.2% core organic sales growth.

The company’s earnings and net sales surpassed the Zacks Consensus Estimate and increased significantly year over year. The results were driven by an increase in net sales and gross margin and contributions from acquisitions amid continuous raw material supply woes.

Beacon Roofing Supply, Inc. BECN reported strong results for second-quarter 2022. Both earnings and revenues surpassed their respective Zacks Consensus Estimate and increased significantly on a year-over-year basis.

BECN’s solid results were backed by strong net sales, gross margin expansion and operational improvement.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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