RH (RH) Crushes Profit, Sales and Guidance Estimates to Send Shares Higher, Analysts Raise PTs on 'Impressive Top and Bottom Line Beat'

Shares of RH (NYSE: RH) are up more than 6% in pre-open Thursday after the company smashed quarterly estimates and raised guidance.

The company made a profit of $4.89 per share to top the $4.03 per share expected from market analysts. Sales came in at $860.8 million, easily surpassing the $752 million consensus.

“Fiscal 2021 is off to a strong start, with revenues up 78% in the first quarter versus down 19% a year ago. Total Company demand increased 101% in Q1 and RH Core demand increased 109%, the strongest demand trends in our industry,” CEO Gary Friedman said in a statement.

For the current quarter, the company is projecting sales to go higher by 35% to 37%, while analysts were expecting 26%. On a full-year basis, the company is looking to raise revenues by 25%-30%, which is higher than the previous guidance of 15%-20%.

“While fiscal 2021 will surely be a tale of two halves, there are many data points that lead us to feel optimistic that our strong performance will continue through the second half of 2021 with growth reaccelerating in fiscal 2022 and beyond. These include a strong housing and renovation market, both with pent up demand and a long tail, a record stock market, low interest rates and the reopening of several large parts of our economy,” Friedman added.

Cowen analyst Max Rakhlenko raised the price target by just over 10% to $750.00 per share on the Outperform-rated RH. The analyst was impressed by the quarter delivered by RH, which is “redefining the industry.”

“We view RH as a luxury furniture leader in an estimated ~$57bn market with 4.5% market share, and a significant runway for further gains. RH remains in the earlier innings of a multi-year transformation journey with secular tailwinds and ongoing revenue & margin catalysts set to drive upside to management's +15% to +20% annual net income growth target. Continued operational improvements combined with more efficient capital deployment produces a leading ROIC profile and strong free cash flow generation. We are also constructive on RH’s International expansion opportunity beginning with RH England as the retailer is well positioned to disrupt the market,” Rakhlenko said in a note.

Telsey analyst Cristina Fernández also raised the price target to $725.00 per share from $675.00 per share as demand remains robust.

“While we expect demand for RH products to slow in 2H21 and early 2022 from the current elevated levels, we remain positive on the RH story as the company transforms into an international luxury home lifestyle brand from a US home furnishings' retailer. The change is being supported by initiatives to elevate the merchandise (including the launch of Contemporary in Fall 2021), add new experiences (like RH Guesthouse), transform the website, and increase gallery productivity,” the analyst wrote in a memo to clients.

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