RH's Earnings Decline & Analyst Rating Spark Investor Concerns

RH's stock faces pressure with a projected EPS drop of 60.81% and a Zacks Rank of #5. Despite revenue growth, analysts show caution, impacting investor sentiment ahead of the upcoming earnings release.

Date: 07-09-2024

AI Rating: 4

In the recent market performance, RH (RH) has shown a minor decline of 0.7%, which is notably less severe compared to the broader market losses, including a 1.73% drop in the S&P 500. Over the past month, RH's stock fell by 2.41%, underperforming compared to the Consumer Staples sector's gain of 5.69% and the S&P 500's gain of 6.22%, indicating a challenging market position.

Investors are particularly focused on the upcoming earnings report expected on September 12, 2024, where RH is projected to report earnings of $1.54 per share. This anticipates a significant year-over-year decline of 60.81%, raising concerns about decreasing profitability. Although revenue is expected to grow by 3.4% to $827.71 million for the quarter, the earnings outlook could be a point of contention for investors.

The full-year consensus estimates foretell an earnings per share (EPS) of $7.52, which represents a modest year-over-year increase of 9.46%. However, the prospects of revenue totaling $3.2 billion demonstrate a slower growth rate of 5.69%. These figures indicate a mixed outlook where revenues grow, but earnings face substantial pressure.

Moreover, recent analyst estimate changes have seen the consensus EPS projection decrease by 4.94% over the past 30 days, reflecting dwindling optimism about RH’s near-term performance. The Zacks Rank of #5 (Strong Sell) points to a predominantly negative sentiment among analysts, linking further deterioration in share performance.

In terms of valuation, RH's Forward P/E ratio stands at 33.23, which is considerably higher than the industry average of 20.67, suggesting that RH may be trading at a premium despite its current challenges. Additionally, with a PEG ratio of 1.01 compared to the sector's average of 2.02, RH's growth in relation to its price does not seem favorable.

Given that the Consumer Products - Staples industry ranks in the bottom 31% of all industries, the pressures faced by RH could translate into further stock price volatility. Investors should be cautious and monitor these metrics closely, particularly leading into the upcoming earnings announcement.

Stocks: RH