Select Comfort reported a beat and raise quarter, but Nagle sees potential earnings risk throughout the rest of the year.
Specifically, Select Comfort will begin rolling out its new 360 bed line in the second quarter and the company has earned itself a poor track record for inconsistent performance. The analyst also believes flat pricing on the new models will limit ticket growth moving forward.
Nagle also believes the company has created for itself a greater reliance on driving comp traffic, which has been "very volatile" over the past few years. In fact, the company's own full year earnings guidance implies a growth rate of (19) percent to +11 percent for the rest of the year which "at least acknowledges the potential for volatility in coming quarters."
In addition, the analyst highlighted the "highly niche nature" of Select Comfort's core product offering which may limit consumer update.
Finally, Nagle noted that shares of Select Comfort are trading at 21x the midpoint of its guidance and 17x the analyst's 2018 earnings per share which implies that the aforementioned risks aren't priced into the stock.
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Latest Ratings for SCSS
|Apr 2017||Raymond James||Downgrades||Strong Buy||Market Perform|
|Oct 2016||Bank of America||Downgrades||Neutral||Underperform|
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