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Buckingham Believes Restoration Hardware's Margins Have Bottomed, Upgrades

Buckingham Believes Restoration Hardware's Margins Have Bottomed, Upgrades

The Buckingham Research Group sees recovery in fiscal year 2017 for Restoration Hardware Holdings Inc (NYSE: RH) citing bottoming out of margins and lower risk of EPS. However, the firm continued to remain cautious about the decelerating trends in the current year's second half, blaming it on the lower demand of luxury.

Analysts Kelly Halsor and John Steger think that the company would be able to meet their EPS forecast of $1.60–$1.80 for fiscal year 2016 thus removing the fear of any downward revisions. As a result, the analysts not only think the stock could stabilize but also found it apt to upgrade it from Underperform to a Neutral rating and boosted the target price from $30 to $34.

Related Link: Oppenheimer Sees A Number Of Reasons Williams-Sonoma/Restoration Hardware Deal Could Make Sense

In a research note, the brokerage viewed, "Both core product newness introductions and in-line inventory levels at the end of 4Q16 point to a potential EPS inflection in FY17 as RH recaptures a portion of the margin lost in FY16. We point out, however, that our FY17 EPS est of $2.14 is $0.22 below cons based on the likelihood that RH will need to reinvest in opening price points to satisfy a more value conscious customer."

Aside from these, these analysts see increased possibility of Restoration Hardware gaining from its investments in supply chain with the appointment of a key executive, although it might offset margin recovery slightly next year.

The brokerage thinks that there is limited upside potential to shares pointing out the ambiguity in the business that might result in lower estimate of EPS for fiscal year 2017.

At last check, the stock traded up by $0.31, or 0.91 percent, to $34.52.

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Latest Ratings for RH

Nov 2019Initiates Coverage OnOverweight
Sep 2019MaintainsOutperform
Sep 2019MaintainsBuy

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Posted-In: Buckingham Buckingham Research GroupAnalyst Color News Upgrades Price Target Analyst Ratings Movers


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