Cantor Fitzgerald Reviews Lumber Liquidators' Earnings, Says Business Model Is 'Still Intact'

In a report published Wednesday, Cantor Fitzgerald analyst Laura Champine commented on Lumber Liquidators Holdings Inc (NYSE: LL)'s first quarter results, which demonstrated the company's business model isn't "broken" and its value proposition and broad assortment should enable it to regain sales momentum and market share gain.Lumber Liquidators reported a loss of $0.29 in the quarter, worse than the analyst's estimate of a $0.16 loss. In fact, excluding a $10 million accrual related to an ongoing Department of Justice investigation, earnings per share would have still fallen $0.07 short of expectations. However, the analyst did note that sales trends improved sequentially in April, but not as much as expected.Looking forward, Champine expects the remainder of 2015 will be a "challenging" year as sales will be slow to recover while gross margin will continue to be pressured. The analyst is now projecting second quarter same-store sales to fall 7 percent (versus prior estimates of flat) on top of the 7.1 percent decline seen in the second quarter 2014. Moreover, gross margins are projected to fall to 32 percent, marking the lowest single-quarter rate since 2006 as heavy discounting continued in April and will persist throughout the quarter.With that said, the analyst lowered her second quarter earnings per share estimate to $0.01 from $0.46. For the full year, she is now projecting an earnings per share of $0.41 (versus a prior estimate of $1.83).Nevertheless, shares remain Buy rated with a price target lowered to $42 from a previous $45. The analyst did caution that owning shares is best suited for risk-tolerant investors given the "cloudy" near-term picture.