RH Rises 12% on Upbeat Q3 Results; Ups Guidance

Shares of RH (RH) rallied 12.1% in Wednesday’s extended trading session after the company reported stronger-than-expected results for the third quarter of 2021. The company offers furniture, lighting, textiles, bathware, decor, outdoor and garden as well as baby and child products.

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Quarterly revenues stood at $1.01 billion, up 19% year-over-year. Also, the figure surpassed the consensus estimate of $985.2 million. (See RH stock chart on TipRanks)

The company reported adjusted earnings per share (EPS) of $7.03, which compares favorably with $6.20 per share in the same quarter last year. The Street had estimated earnings of $6.64 per share.

As of October 30, 2021, RH operated 66 galleries, 38 outlets and 14 waterworks showrooms. Gross margin expanded 180 basis points to 50.2%.

The Chairman and CEO of RH, Gary Friedman, said, “Our performance demonstrates both the desirability of our exclusive products and our ability to overcome the compounding supply chain challenges that led us to delay the launch of RH Contemporary, the opening of our first RH Guesthouse and several Galleries, and the mailing of our Fall Source Books until Spring of 2022.”

Guidance

For 2021, the company has raised its revenue guidance. It expects net revenue growth of 32% to 33%, compared to 31% to 33% guided earlier. RH expects its adjusted operating income margin to be between 25.3% and 25.5%, up from the prior guidance of 24.9% to 25.5%.

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Stock Rating

Following the release, Wells Fargo analyst Zachary Fadem maintained a Buy rating on RH with a price target of $800 (38.7% upside potential).

Fadem noted, “While the Q4 outlook did not bring the upside we believe investors have been accustomed to (and they passed on FY22 guide), we believe the setup improves into FY22 via new product launches, international expansion and gradual alleviation of supply chain backlog. All in, we see enough idiosyncratic growth drivers to put RH shares back on track, and see an attractive entry point.”

The stock has a Strong Buy consensus rating based on 3 unanimous Buys. The average RH price target of $765.67 implies 32.7% upside potential from current levels.

Bloggers Weigh In

TipRanks data shows that financial blogger opinions are 100% Bullish on RH, compared to a sector average of 70%.