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Bull of the Day

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La-Z-Boy (LZB - Snapshot Report) recently delivered its 3rd consecutive positive earnings surprise on the back of a stellar 12.7% jump in same-store written sales for its Furniture Galleries® store network. This prompted analysts to revise their earnings estimates meaningfully higher for both this year and next, sending the stock to a Zacks Rank #1 (Strong Buy).

Based on current consensus estimates, analysts project 49% earnings growth this year and 21% next year. Given the strong earnings momentum and growth projections, its forward P/E multiple of 19 looks reasonable. This leaves plenty of upside for the stock to continue running higher over the next several weeks.

La-Z-Boy Incorporated is a residential furniture maker that markets its products under various brand names including La-Z-Boy, England, Lea, Kincaid, and American Drew. The company has a network of 312 La-Z-Boy Furniture Galleries® stores and 567 Comfort Studios® locations, each dedicated to marketing its La-Z-Boy branded products. The company owns 93 of the La-Z-Boy Furniture Galleries® stores while the remainder, as well as all 567 Comfort Studios® locations, are independently owned and operated.

First Quarter Results

La-Z-Boy reported better-than-expected results for the first quarter of its fiscal 2014 on August 20. The first quarter is typically a seasonally slow quarter for the company, but it's results this time were anything but sluggish. Earnings per share came in at $0.18, beating the Zacks Consensus Estimate by 3 cents. And it was more than double EPS of 8 cents in the same quarter last year.

Sales rose 6% to $318.9 million. Same-store written sales for the La-Z-Boy Furniture Galleries® store network jumped an impressive 12.7%, and that was on top of a 9.2% increase in last year's first quarter.

Meanwhile, profit margins expanded and operating income surged 94% as the company leveraged its fixed expenses.

Estimates Rising

Following the Q1 beat, analysts revised their estimates higher for La-Z-Boy, sending the stock to Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2013 is now $1.18, up from $1.14 just 30 days ago. The 2014 consensus is currently $1.42, up from $1.34 over the same period. Based on consensus estimates, analysts project 49% earnings growth this year and 21% growth next year.

You can see the strong increase in consensus estimates over the last few months in the company's 'Price & Consensus' chart:

Strong earnings momentum can be seen throughout 'Furniture' industry too. It ranks 13th out of the 265 industries that Zacks Ranks.

Valuation

La-Z-Boy doesn't look like a screaming value at 19x 12-month forward earnings, but it's not an unreasonable multiple considering the very strong earnings growth projections. Plus, it's price-to-sales ratio of 0.9 is a slight discount to the industry median of 1.0.

The company also pays a dividend that yields 0.7%.

The Bottom Line

With rising estimates, strong growth projections and reasonable valuation, La-Z-Boy offers investors attractive upside potential.

Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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