Earnings Preview: What To Expect From Restoration Hardware On Wednesday

By Adam Sarhan, Contributor
NASHVILLE, TN - JUNE 14: Signage seen during Restoration Hardware's unveiling at The Gallery at Green Hills at RH on June 14, 2018 in Nashville, Tennessee. (Photo by Jason Kempin/Getty Images for RH) Getty Images for RH

Restoration Hardware Holdings Inc. is scheduled to report earnings after Wednesday’s close. The stock just hit a record high of $744.56 and is currently trading near $655.01/share. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, here is what the Street is expecting:

Earnings Preview:

Restoration Hardware is expected to report earnings of $6.58/share on $972.72 million in revenue. Meanwhile, the so-called Whisper number is $6.76. The Whisper number is the Street's unofficial view on earnings.

A Closer Look At The Fundamentals:

Fundamentally, the company is growing at a very rapid clip and has enjoyed double and triple digit earnings growth in each of the past four quarters. Meanwhile, revenue has grown by double digits in each of the past three quarters on a year over year basis. The company sports a P/E ratio of 32 which is not that high compared to other high ranked growth stocks.

A Closer Look At The Chart:

Technically, the stock is building a long multi-month base as it pauses to digest its recent run. The stock is acting fine as long as it trades above support of its current digestion period near $597/share. Meanwhile, resistance of its current base resides around $733-744/share. By definition, the stock is range-bound until either support or resistance is taken out. If the stock breaks below support it will likely continue to fall and if it breaks above resistance it will likely continue to rally. Until support or resistance is broken, we have to expect this choppy range-bound action to continue. Watch those two levels when the company opens tomorrow to see if earnings can be a catalyst to break the stock out of its long sideways trading range.

Pay Attention To How The Stock Reacts To The News:

From where I sit, the most important trait I look for during earnings season is how the market and a specific company reacts to the news.


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