Oppenheimer On RH: We Told You So
33251269 - depressed businessman leaning his head below a bad stock market chart
RH (NYSE:RH) shares lost one-quarter of their value today, after the home-furnishings company lowered its earnings guidance for FY17 to $1.67-$1.94 per share (from $1.78-$2.19), compared to Street consensus of $2.18. The company also introduced Q2 (July) EPS guidance of $0.38-$0.43, below consensus estimate of $0.65. These forecasts are predicated on higher sales growth with a more limited flow-through to the bottom line.
Oppenheimer analyst Brian Nagel commented, “Several weeks ago, we published a detailed report on RH entitled “Will Challenges of 2016 Extend into 2017?”. In this piece, we outlined our increasingly non-consensus thesis that given the potential for ongoing operational challenges at RH, we viewed it as too early to turn bullish on shares. The weak-ish final Q1 results and now lower FY17 guidance that RH reported after the close yesterday, in our minds, support our cautious nearer term stance on shares. The RH business model potentially represents one of the most interesting new concepts to emerge in retail in a long while. But, it will take time for this still experimental business to work out the kinks.”
“We are reducing estimates to reflect the reported results and now tempered guidance. Our FY17 (Jan. 2018) earnings estimate goes to $1.79 from $1.90. Our FY18 (Jan. 2019) EPS outlook goes $0.05 lower to $2.35 from $2.40 previously and remains well below a current consensus expectation of $2.71,” the analyst added.
As such, Nagel reiterates a Perform rating on RH shares, without providing a price target.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Nagel has a yearly average return of 0.1% and a 48% success rate. Nagel has a average return when recommending RH, and is ranked #2710 out of 4567 analysts.
Out of the 16 analysts polled in the past 12 months, 12 rate RH stock a Hold, while 4 rate the stock a Buy. With a downside potential of 5%, the stock’s consensus target price stands at $40.55.