RH’s 4Q Results Top Estimates As Housing Demand Picks Up; Shares Pop After-Hours

Shares of RH Inc. jumped 8.4% in Wednesday’s extended trading session after the home-furnishings retailer reported better-than-expected 4Q results. Strong demand for luxury products, driven by the booming housing market, fueled this outperformance.

RH’s (RH) 4Q adjusted earnings surged 36% on a year-over-year basis to $5.07 per share and came in well ahead of analysts’ expectations of $4.76 per share. Adjusted net revenues climbed 22% to $812.6 million and surpassed the consensus estimate of $797.27 million.

The company’s core demand was up 36% in the quarter, while overall demand surged 29%. Additionally, adjusted operating margin was 23.7%, up 630 basis points year-over-year. (See RH stock analysis on TipRanks)

RH CEO Gary G. Friedman commented, “While we expect to face continued difficulties ramping vendor production to meet demand and don’t see the challenges with ocean freight or port congestion resolving themselves anytime soon, it’s hard not to forecast first quarter revenue growth of at least 50%, and adjusted operating margin in the 20% range.”

“With the momentum in the business, we believe it’s safe to say 2021 should result in revenue growth in the range of 15% to 20% with adjusted operating margin expanding 100 to 200 basis points and ROIC in excess of 60%,” Friedman added.

Following the 4Q results, Wells Fargo analyst Zachary Fadem increased the stock’s price target to $575 (18.5% upside potential) from $525 and reiterated a Buy rating.

Fadem said, “All in, RH continues to impress in an environment that’s clearly playing to the company’s strengths.”

The analyst expects “shares to grind higher, and see no shortage of LT growth levers (Int’l, hospitality, etc.) and a clear line of sight to 25%+ EBIT margins.”

Shares have skyrocketed 357% over the past year, while Wall Street analysts are still bullish about the stock. The Strong Buy consensus rating boasts 4 unanimous Buys. Looking ahead, the average analyst price target stands at $568.75, putting the upside potential at 17.2% over the next 12 months.

What’s more, RH scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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