Piper Analysts Expect More Tough Times Ahead For Lumber Liquidators

• Lumber Liquidators Holdings Inc LL is scheduled to announce its third-quarter results before the market opens on Wednesday and expectations keep getting lower.
• In a report issued Tuesday, Piper Jaffray analysts Peter J. Keith and Jonathan N. Berg shared a preview of the earnings call and are “expecting another tough quarter” for the company.
• The analysts reiterated a Neutral rating and $13 price target.

In spite of healthy industry trends seen over the course of the third quarter, Piper analysts explained they remain concerned about the possible downside to consensus earnings estimates of ($0.19) per share. The firm is modeling a larger net loss of ($0.31) per share.

According to the research note, the analysts' two main concerns about the third quarter are: (1) still sluggish sales trends, especially in the weeks following the second transmission of the 60 Minutes special in mid-August, and (2) the believe that “the Street is underestimating GM pressure,” which will be only fully felt in the third quarter.

They noted that even though the company managed to reach a settlement with the Department of Justice in early October, it still faces two outstanding issues that will probably “keep an overhang on the stock for the foreseeable future.”

As per the report, Piper Jaffray analysts were modeling a third quarter net loss of ($0.31) per share, based on a comp decline of 8 percent. They were also projecting a gross margin of 28.1 percent, down 1,100 bps year-over-year.

Mostly on the back of the negative comp, the firm was also anticipating total SG&A deleverage of 400 bps year-over-year, resulting in a negative OPM of (5.3) percent, down 1,500 bps year-over-year.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.