stock is trading lower Wednesday morning after the home-furnishings retailer reported a mixed fiscal fourth quarter, and said it plans for a 3-for-1 stock split. At least one analyst spies a buying opportunity.
RH (ticker: RH) said it earned an adjusted $5.66 per share on revenue that climbed 11% year over year to $902.74 million. Analysts were looking for EPS of $5.59 on revenue of $931.3 million.
For the full year, RH said it expects revenue growth of 5% to 7%. The company notched revenue of $3.76 billion in 2021; a 6% increase equates a total of about $4 billion, compared with the $4.14 billion consensus estimate.
That said, the company did leave the door open to increased guidance. RH noted in its press release it has “experienced softening demand in the first quarter that coincided with Russia’s invasion of Ukraine in late February and the market volatility that followed …it is prudent to remain conservative until demand trends return to normal.”
In addition, RH said that it plans a 3-for-1 split of its common stock this spring. It also said that Chairman and CEO Gary Friedman intends to sell 1.7 million shares related to 2.9 million options that will soon expire. The options were tied to the company’s November 2012 initial public offering. Following the transaction, Friedman will still own 5.7 million shares, or 21% of stock outstanding.
The news follows strong results from fellow home-furnishings retailer
earlier this month.
RH was initially down some 10% on the news, but reversed course and was about flat in late trading Tuesday; on Wednesday morning it’s off 6.4% to $361.17. RH stock still sports a year-to-date loss of about 28%.
Still, Jefferies analyst Jonathan Matuszewski argues that it’s time to get more bullish on RH, writing that he sees a “rare entry point” for the shares. He boosted his rating on the company to Buy from Hold on Wednesday, although he lowered his price target to $560 from $634.
RH’s price-to-earnings multiple has halved since August, a move that Matuszewski calls “excessive” for such a “high-quality, branded business.” While some moderation in luxury real estate seems likely, that is already reflected in the stock, while recent data show that higher-end home sales aren’t slowing as quickly as some feared.
“With RH trading closer to aspirational brands vs. true luxury brands, we see minimal downside, and investors should feel comforted by its unmatched pricing power,” he writes.
Write to Teresa Rivas at [email protected]