Last night, RH (RH) raised its outlook for the third quarter and gave other guidance in advance of the company’s analyst day event being held today. Prior to that announcement, Buckingham analyst Kelly Crago had raised her price target on the shares, telling investors that she expected a positive quarterly pre-announcement in conjunction with the event. The Fly published a summary of the note yesterday. OUTLOOK: RH raised its third quarter adjusted earnings per share view to $1.02-$1.04 from 68c-80c, and its revenue forecast for the quarter to roughly $592.5M from $575M-$590M. The company also raised its 2017 adjusted net income view to $82M-$87M from $70M-$77M, while narrowing its 2017 captial expenditure view to $120M-$130M from $120M-$140M. Additionally, RH said it sees 2018 revenue of $2.58B-$2.62B and adjusted net income of $125M-$145M. While the company cut its fourth quarter adjusted revenue view to $655M-$680M from $664M-$689M, it raised the fourth quarter adjusted net income view to $37M-$41M from $33M-$37M. BUCKINGHAM CALLED PRE-ANNOUNCEMENT: Ahead of RH’s analyst day, Buckingham’s Crago raised her price target for RH to $112 from $88, saying she expected a positive third quarter pre-announcement in conjunction with the event. Additionally, the analyst told investors that she believes current trends in the business are “strong and potentially accelerating” driven by the recent source book introduction and increasingly easy comparisons. Crago noted that she remained bullish on shares in light of potential upward earnings per share revisions over the coming quarters, and reiterated a Buy rating on the stock given the potential upside margin opportunity still ahead and the higher likelihood of a potential debt conversion and reduced balance sheet risk. CITI SAYS BUY RH: After the announcement, Citi analyst Geoffrey Small upgraded RH to Buy and raised his price target on the shares to $111 from $76, saying the company’s positive pre-announced third quarter results and initial 2018 outlook alleviates concerns around the balance sheet and uncertainty regarding demand as the retailer backed off of elevated levels of sales and promotions. The analyst also told investors that RH’s work to differentiate itself in the premium segment of the furniture and home furnishings market is yielding clear benefits in terms of sales growth and margin improvement, while recent work to simplify the supply chain has led to sizeable cash generation. Small sees a “long runway for growth” from these elements, and expects the stock will also benefit in the near-term from a short squeeze. Meanwhile, Deutsche Bank analyst Adam Shindler raised his price target for RH to $130 from $100, while reiterating a Buy rating on the shares. PRICE ACTION: In morning trading, shares of RH have jumped over 22% to $101.87.
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