RH Gears Up to Post Q1 Earnings: Buy or Hold Ahead of Results?

RH RH is scheduled to report first-quarter fiscal 2025 results on June 12, after the closing bell.In the last reported quarter, RH’s earnings and revenues missed the Zacks Consensus Estimate by 17.3% and 1.8%, respectively. Nonetheless, the top and bottom lines increased 10% and 119.4% on a year-over-year basis, respectively. The adjusted operating margin of 11.3% rose 220 basis points (bps), showing the company’s ability to expand profitability even amid challenging market conditions.RH’s Earnings Surprise HistoryThis leading luxury home furnishings retailer has surpassed earnings estimates once in the trailing four quarters and missed on the other three occasions, with an average negative surprise of 103.5%, as shown in the chart below. Image Source: Zacks Investment Research How are Estimates Placed for RH Stock?For the quarter to be reported, the Zacks Consensus Estimate for loss per share has widened to 9 cents from 6 cents in the past 30 days. In the prior-year quarter, RH incurred a loss of 40 cents per share. (See the Zacks Earnings Calendar to stay ahead of market-making news.)RH Price and EPS Surprise  RH price-eps-surprise | RH Quote The consensus estimate for revenues is pegged at $818.9 million, indicating a 12.6% rise from the year-ago quarter's reported figure.What the Zacks Model Unveils for RHOur proven model predicts an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.Earnings ESP: RH has an Earnings ESP of +9.80%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Zacks Rank: The company has a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors to Note Ahead of RH’s Q1 ResultsAlthough the company has been grappling with sluggish demand in the luxury home furnishings sector, which is closely tied to consumer sentiment and housing market trends, RH remains confident in its ability to sustain revenue growth, aided by ongoing strategic initiatives. The company's product transformation plans for 2025, including the RH Outdoor and Interiors Sourcebooks, along with international expansion efforts, are likely to have contributed to fiscal first-quarter results. For the quarter, the company expects revenue to grow 12.5-13.5%.From the margin perspective, RH anticipates the gross margin in the fiscal fourth quarter to be impacted by ongoing economic pressures, including higher costs associated with logistics, raw materials and promotional activities.The company expects the adjusted operating margin between 6.5% and 7%, and the adjusted EBITDA margin between 12.5% and 13% in the to-be-reported quarter. In the year-ago quarter, the company recorded an adjusted operating margin of 6.5% and an adjusted EBITDA margin of 12.3%. Although the expected figures indicate a slight margin improvement, the outlook includes negative impacts of 160-200 bps on the operating margin due to start-up costs for international expansion.RH Stock’s Price PerformanceShares of the company have lost 18.2% over the past month. RH’s prospects are hurting from a weak sales environment in home furnishings, softness in the U.S. housing market, mortgage rate fluctuations and uncertainties related to newly imposed tariffs. Image Source: Zacks Investment Research The broader industry weakness is evident as Hoya Capital Housing ETF HOMZ has declined just 2.3% in the same period, which has 20% exposure in the home improvement and furnishings segment. Meanwhile, other industry players like The Lovesac Company LOVE, Williams-Sonoma, Inc. WSM and Haverty Furniture Companies, Inc. HVT have recorded declines during the same period. In the said time frame, Lovesac, Williams-Sonoma and Haverty Furniture have lost 3.1%, 9.8% and 3.3%, respectively.RH Trades at a DiscountFrom a valuation standpoint, the company is currently trading at 15.02X forward 12-month price-to-earnings (P/E). RH is trading at a discount to industry peers like Lovesac and Williams-Sonoma, which are trading at 19.31X and 18.03X, respectively. Meanwhile, Haverty Furniture is trading lower at 11.26X.Investment Thoughts on RHWhile RH faces challenges from weak demand, housing market softness, and cost pressures, its ongoing product transformation, international expansion, and revenue growth outlook offer some support. It may be prudent for investors to monitor the stock for further updates. Those already holding shares can consider maintaining their position, given the company’s ongoing efforts to strengthen the business.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Williams-Sonoma, Inc. (WSM): Free Stock Analysis Report RH (RH): Free Stock Analysis Report Haverty Furniture Companies, Inc. (HVT): Free Stock Analysis Report The Lovesac Company (LOVE): Free Stock Analysis Report Hoya Capital Housing ETF (HOMZ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks