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RH Queued for Q4 Earnings: Key Factors to Take Into Account

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RH (RH - Free Report) is scheduled to report fourth-quarter fiscal 2021 (ended Jan 29, 2022) results on Mar 29, after market close.

In the last reported quarter, this leading luxury home furnishing retailer’s earnings surpassed the Zacks Consensus Estimate by 5.2%. Markedly, the company beat earnings expectations in each of the last four quarters, with the average being 14.2%. The reported figure also increased 13.4% from the year-ago level. Also, its net revenues topped expectations by 2.1% and grew 19.1% year over year.

Trend in Estimate Revisions

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved upward to $5.63 from $5.62 over the past 30 days. The estimated figure indicates an increase of 11.1% from $5.07 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $928.8 million, suggesting 14.3% growth from the year-ago reported figure of $812.6 million.

Factors to Note

Strong demand buoyed by solid momentum of the housing market, given the migration of consumers to larger suburban and second homes, is expected to reflect on RH’s earnings and revenues for the fiscal fourth quarter. This is likely to result in square footage growth, thereby driving accelerated furniture and furnishings demand. Additionally, the reopening of several large parts of the economy and elevated home spending may have added to the tailwinds.

The company has been working on various strategies to elevate and enhance the RH brand image. Also, it has been transforming the entire business into a digital platform via The World of RH — a portal presenting the company’s products, places, services and spaces. Its digital experience — including RH Interiors, Modern, Outdoor, Baby & Child plus Teen — has been significantly adding strength to the company as it generates strong online revenues, with Source Books driving traffic to Galleries and websites.

Meanwhile, RH has been working on cost-saving initiatives such as redesigning the supply chain, reducing inventory, improving product margins and so on. Management expects these initiatives to be reflected in fiscal third-quarter earnings and margin expansion. Also, greater pricing power is expected to have boosted gross margins, while SG&A expenses are likely to have remained under control as the company limited advertising due to supply chain constraints.

Although the economy has been rebounding from COVID-19 impacts, retailers are still grappling with the effects of the same. Disruption across the global supply chain owing to the pandemic is anticipated to have been a cause of concern. Also, rising raw material costs may have been a risk.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for RH this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of +0.91%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: RH currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Williams-Sonoma Inc. (WSM - Free Report) — which currently carries a Zacks Rank #1 — reported impressive earnings for fourth-quarter fiscal 2021 (ended Jan 30, 2022). The company’s earnings beat the Zacks Consensus Estimate and improved on a year-over-year basis, courtesy of strength across all brands along with accelerated e-commerce growth.

Williams-Sonoma remains optimistic about business strength, continued success of new initiatives and competitive advantages that are rooted in key differentiators like in-house design, digital-first channel strategy, and values.

Builders FirstSource (BLDR - Free Report) — which currently carries a Zacks Rank #1 — ended 2021 on a solid note. The company reported solid results for fourth-quarter 2021, wherein earnings and net sales surpassed the Zacks Consensus Estimate as well as increased significantly year over year.

Builders FirstSource ‘s results were driven by an increase in net sales and gross margin amid persistent raw material supply woes.

Beacon Roofing Supply, Inc. (BECN - Free Report) — a Zacks Rank #3 stock — reported solid results for calendar fourth-quarter 2021 or the transition period (Oct 1 to Dec 31, 2021).

Beacon Roofing’s fourth-quarter top and bottom lines surpassed their respective Zacks Consensus Estimate as well as improved significantly on a year-over-year basis. The solid results were mainly backed by strong net sales, gross margin expansion and operational improvement.