Telsey Advisory Group has maintained its Market Perform rating on Restoration Hardware (NYSE: RH (NYSE:RH)), with a steady price target of $290.00.
The firm anticipates Restoration Hardware to revise its 2024 guidance downward, in line with recent trends observed in the home furnishing and improvement sectors.
The expectation follows a pattern of reduced consumer spending on furniture and home improvement, influenced by a challenging housing market impacted by high mortgage rates.
Restoration Hardware's efforts, including new product launches and increased marketing through sourcebook mailings, are expected to drive some growth, but perhaps not as much as previously estimated.
Telsey observed a greater emphasis on clearance items in the company's second-quarter communications compared to the previous year, and a new promotional discount offered at RH restaurants over the July 4th weekend.
In response to these market conditions, Telsey has adjusted its 2024 earnings estimate for Restoration Hardware to $7.30 per share, down from $8.30, which is slightly above the FactSet consensus of $7.28.
This reflects a moderated sales growth forecast of 4.6%, down from 6.0%. The revised operating margin expectation is now 12.8%, compared to the previous estimate of 13.5% and the company's guidance of 13%-14%.
For the second quarter of 2024, Telsey's revised earnings per share (EPS) estimate is $1.54, down from $1.61, which compares to the FactSet consensus of $1.57. The revenue projection has been slightly lowered to $823 million, representing a 2.8% increase, while the FactSet consensus stands at $825 million with expected growth of 3%-4%.
The firm also anticipates a second-quarter operating margin of 11.4%, a slight decrease from the prior estimate of 11.7% and within the company's guidance range of 11%-12%.
Meanwhile, Stifel, a financial services firm, initiated coverage on Restoration Hardware shares with a Buy rating and a price target of $315.00, signaling confidence in the company's potential for growth. This move followed the company's Q1 2024 results, which fell short of expectations, with reported revenues of $727 million and a projected revenue growth target of 3-4% for Q2 2024.
Restoration Hardware's CEO, Gary Friedman, invested $10 million in company stock, increasing his stake to approximately 25.1% of the company's outstanding common stock.
InvestingPro Insights
Restoration Hardware (NYSE:RH) is navigating a challenging economic environment, as reflected in the market's response to its financial health and stock performance. With a market capitalization of $4.45 billion, the company is trading at a high earnings multiple, with a P/E ratio of 56.58, suggesting investors may be expecting higher earnings growth in the future. However, the adjusted P/E ratio over the last twelve months as of Q1 2025 stands at 46.08, indicating a slight moderation in valuation expectations.
The company's revenue trends show a contraction, with a decrease of 10.54% in the last twelve months as of Q1 2025, which aligns with Telsey Advisory Group's observation of downward pressure on consumer spending in the home furnishing sector. Despite this, Restoration Hardware has maintained a robust gross profit margin of 45.0%, which may offer some resilience amidst the revenue decline. Analysts remain optimistic about the company's profitability, predicting it will be profitable this year, a sentiment supported by its profitability over the last twelve months.
Investors considering Restoration Hardware should note that the company does not pay a dividend, which could influence investment decisions for income-focused portfolios. For those interested in a deeper analysis, InvestingPro offers additional tips on Restoration Hardware, providing a comprehensive view of the company's financial health and stock performance. Discover more InvestingPro Tips by visiting https://www.investing.com/pro/RH, where over five additional insights are available to enrich your investment strategy.
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