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Zack’s Bear of the Day: Ethan Allen Furniture


Ethan Allen Interiors (NYSE:ETH) was lauded as the Bull of the Day back in this November installment of the daily article that highlights stocks that have increasing earnings estimates. Today, ETH is a Zacks Rank #5 (Strong Sell) and the Bear of the Day. Let’s see what has happened here and if this is company specific or a harbinger for the furniture industry.

Company Description

Ethan Allen Interiors operates as an interior design company and manufacturer and retailer of home furnishings. As of June 30, 2014, it operated a network of approximately 295 retail design centers. The company was founded in 1932 and is headquartered in Danbury, Connecticut.

Only One Miss

When I think of a Zacks Rank #5 (Strong Sell) I think of a stock that probably has a dismal earnings history. That is not the case with ETH, as they have topped the Zacks Consensus Estimate in 4 of the last 7 quarters.

The problem is that there were 2 meets and the most recent quarter was a miss. The company reported earnings of $0.37 when the Zacks Consensus Estimate was calling for $0.45. Revenue also came in under expectations for the first time since the December 2013 quarter.

Earnings Estimates

Following the earnings miss of 8 cents, analysts took down numbers in a meaningful way. The Zacks Consensus estimates for the June 2015 fiscal year moved from $1.72 in December to $1.57 in January and is now at $1.54.

The next fiscal year (2016) also saw a precipitous drop from $2.05 to $1.89.

Chart

The price and consensus chart for ETH shows how a stock that is seeing earnings estimate decreases is primed for selling. The 2014 estimates (the line that is light powder blue, at least it is to my eye) was actually heading lower for the majority of the 2013 and into the 2014 calendar year. The recent earnings miss breaks a string of several beats & meets, but if we again focus on the estimates for 2015, we see a trend that is anything but positive.

Furniture Industry

One doesn’t have to look to far in the furniture space to find a Zacks Rank #1 (Strong Buy), and my favorite in the space is Haverty Furniture (NYSE:HVT) a name that I used to hold in Home Run Investor. In fact, I wish I never sold it!