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RH to Report Q3 Earnings: Will the Stock Surprise Investors?

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RH (RH - Free Report) , formerly Restoration Hardware, is slated to report third-quarter fiscal 2017 results (ending Oct 28) after the closing bell on Dec 5.

Last quarter, the company delivered a positive earnings surprise of 38.3%. The company also surpassed/met expectations in each of the last four quarters, with the average beat being 21.7%.

In fact, shares of RH, one of the leading home furnishings companies, have rallied more than 200% so far this year, breezing past the Zacks Home Furnishings industry’s gain of only 10.7%.



Let’s see how things are shaping up prior to this announcement.


Factors at Play

RH’s efforts toward redesigning its supply chain network, rationalizing product offerings and the Waterworks acquisition are driving growth and are expected to contribute in the to-be-reported quarter as well. The company’s initiatives like RH Modern, RH Teen, RH Hospitality, redesign of RH Interiors Source Book, and rollout of Design Ateliers across its retail Galleries are expected to contribute to growth in 2017 and beyond.

Recently, the company raised guidance for the fiscal third quarter and fiscal 2017, highlighting the earnings power of “our new membership model, and a dramatically more efficient operating platform”.

The company expects third-quarter revenues to be about $592.5 million, suggesting an increase of 8% on a year-over-year basis despite an approximate 1% negative impact from the recent natural calamities. The Zacks Consensus Estimate for third-quarter revenues currently stands at $599.2 million, up 9.1% year over year.

Again, despite a 1% or 5 cents per share of negative impact from hurricanes Harvey and Irma, RH’s adjusted earnings are expected to be in the range of $1.02-$1.04 per share for the fiscal third quarter compared with the previous guidance of 68 cents to 80 cents. This reflects a substantial increase from the year-ago level of 20 cents.

For the fiscal third quarter, the consensus estimate for earnings is pegged at $1.04 per share, implying 444.7% growth.

What Does the Zacks Model Unveil?

RH does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter..  

Zacks ESP: RH has an Earnings ESP of 0.00%.

Zacks Rank: RH carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Release

Kirkland's, Inc. (KIRK - Free Report) recently posted third-quarter fiscal 2017 results, wherein the company reported wider-than-anticipated loss, comparing unfavorably with the year-ago period. Moreover, management narrowed its earnings outlook for fiscal 2017.

Other Stocks to Consider

Here are stocks in the retail space that has the right combination of elements to beat on earnings this quarter.

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +0.89% and a Zacks Rank #2. The company is slated to report quarterly results on Dec 7, 2017.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +1.75% and a Zacks Rank #3. The company is slated to report quarterly results on Dec 14, 2017.

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