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RH Queued for Q3 Earnings: Key Factors to Take Into Account

RH RH is scheduled to report third-quarter fiscal 2022 (ended Oct 29, 2022) results on Dec 8, after market close.

In the last reported quarter, this leading luxury home furnishing retailer’s earnings surpassed the Zacks Consensus Estimate by 18.7%. The company beat earnings expectations in each of the last four quarters, with the average being 16.7%. The reported figure, however, decreased 4.7% from the year-ago level. RH’s net revenues topped expectations by 2.2% in the quarter and grew 0.3% 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 $4.71 from $4.78 over the last 30 days. The estimated figure indicates a decrease of 33% from $7.03 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $839.1 million, suggesting a 16.6% decline from the year-ago reported figure of $1.01 billion.

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 the furnishing market. A weakening macroeconomic environment, comprising rising interest rates, and softness in luxury housing and stock markets, are expected to have impacted sales in the quarter to be reported.

RH expects fiscal third-quarter net revenues to fall 15-18% year over year. The adjusted operating margin is projected in the 18.5-19% range. In the year-ago period, the company had generated net revenue growth of 19% and an adjusted operating margin of 27.7%. The quarterly results are expected to reflect faster backlog relief, offsetting lower-than-expected demand.

Nonetheless, 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.

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 may have been a cause of concern. Also, rising raw material costs may have posed a risk.

What the Zacks Model Unveils

Our proven model does not predict 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 -1.49%. 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 third-quarter fiscal 2022 (ended Oct 30, 2022), wherein quarterly earnings missed the Zacks Consensus Estimate but revenues beat the same. With this, the company’s bottom line beat the consensus mark in three of the last four quarters, while the top line surpassed for the third quarter.

Although Williams-Sonoma reiterated its fiscal 2022 revenue guidance, it refrained from maintaining or updating guidance through fiscal 2024 owing to the macro uncertainty. This, along with the earnings miss might have disappointed investors.

Builders FirstSource BLDR released its third-quarter 2022 results, wherein it reported 6.9% core organic sales growth.

BLDR’s earnings and net sales surpassed the Zacks Consensus Estimate and increased year over year. The results were driven by an increase in net sales in value-added product categories, gross margin as well as contributions from acquisitions amid continuous raw material supply woes.

Beacon Roofing Supply, Inc. BECN reported strong results for third-quarter 2022. Both earnings and revenues surpassed their respective Zacks Consensus Estimate and increased significantly on a year-over-year basis. The solid results were backed by strong net sales and operational improvement.

Julian Francis, BECN’s president and CEO, said, “We continued to deliver value to our customers, driving record third quarter net income and our 11th straight quarter of year-over-year increases in Adjusted EBITDA. At the same time, we continued making strategic investments toward achieving our Ambition 2025 growth and margin targets.”

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