On Thursday, Telsey Advisory Group adjusted its outlook for Floor & Decor Holdings, Inc. (NYSE: FND), reducing the price target to $95 from the previous $100 while maintaining a Market Perform rating.
The adjustment follows the company's preannouncement of second-quarter results for 2024, which did not meet expectations.
The disappointing update comes exactly one year after a similar occurrence with the second-quarter results of 2023, which initially prompted a more cautious stance from the firm.
The company has made efforts over the past year to enhance customer acquisition, and engagement, and to streamline its operations, including reducing markdowns, expanding into physical retail, and refining return policies.
Despite these initiatives, external economic factors continue to challenge the consumer base of Floor & Decor, leading to further sales pressure from reduced markdown inventory and increased return rates. Additionally, high fixed costs have disproportionately impacted profitability amid a contracting revenue environment.
Last quarter, Floor & Decor reported sales and adjusted EBITDA that fell short of expectations. However, the company had somewhat unexpectedly increased its adjusted EBITDA forecast at that time.
The revised price target of $95 reflects a 0.29x multiple on Telsey's two-year forward sales estimate for Floor & Decor, compared to the near-term multiple of 0.27x and the one-year average multiple of 0.31x.
Floor & Decor Holdings has reduced its price target to $95, marking a cautious stance due to the company's preannouncement of disappointing second-quarter results for 2024. Similarly, Baird reduced its target for Floor & Decor to $115, maintaining an Outperform rating but expecting some negative impact on comparable store sales and overall revenue.
Mizuho Securities, UBS, and TD Cowen also adjusted their price targets, each maintaining a Neutral rating. Mizuho lowered its target to $110 following a decline in comparable store sales, while UBS cut its target to $125 due to mixed views on the company's current performance and prospects. TD Cowen reduced its target to $115, citing ongoing macroeconomic pressures.
InvestingPro Insights
As Floor & Decor Holdings, Inc. (NYSE:FND) navigates through the challenges highlighted by Telsey Advisory Group, real-time data from InvestingPro provides additional context for investors. With a Market Cap of approximately $10.07 billion and a Price to Earnings (P/E) Ratio standing at 44.24, the company is trading at a high earnings multiple, which could be a point of caution for value-focused investors. The Price to Book (P/B) ratio, as of the last twelve months leading up to Q1 2024, is 5.09, reinforcing the notion that the stock might be trading at a premium.
Despite the recent downward revisions in earnings by analysts, Floor & Decor's cash flows have been sufficient to cover interest payments, indicating a level of financial stability. The company operates with a moderate level of debt and has maintained profitability over the last twelve months. Furthermore, with an EBITDA Margin of 42.95%, the company showcases a strong capacity to generate earnings before interest, taxes, depreciation, and amortization relative to its revenue.
InvestingPro Tips suggest that while the stock price may be volatile, analysts predict the company will remain profitable this year. Additionally, Floor & Decor has delivered a strong return over the last five years, which could be of interest to long-term investors. For those seeking more detailed analysis, there are 11 additional InvestingPro Tips available, providing a deeper dive into the company's financial health and stock performance.
For investors considering Floor & Decor's stock, these insights may serve as valuable data points to complement Telsey's revised price target and market performance rating. To explore further, investors can visit InvestingPro for a comprehensive set of tips and metrics.
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