Restoration Hardware

Several analysts gussied up their price targets on RH (RH - Get Report) shares after the home-furnishings retailer reported stronger-than-expected fiscal second-quarter net income and raised its outlook for all of fiscal 2020. A few analysts were less sure.

RH stock was rising 5.5% to $167.60 on Wednesday.

The Corte Madera, Calif., company "is bucking all the trends and growing sales and margin in a normally difficult retail environment," a Stifel team led by John Baugh said in a report. "New stores should provide sales growth." Baugh rates the stock buy and raised his target price 28% to $196 from $153.

RH "is firing on all cylinders, with its brand rising well above the fray of other struggling home furnishings and luxury retailers," Wedbush analyst Seth Basham wrote. He pointed to factors including a wider-than-expected gross-profit margin at 41.7%, off 0.2 point from a year earlier. He reiterates the stock outperform and raised his target to $170 from $160.

At Loop Capital Markets, analyst Anthony Chukumba said he continues bullish, "particularly given the company's differentiated concept and substantial domestic-and eventually, international-growth runways." He rates RH buy with a $180 target, up from $160.'

J.P. Morgan rates RH overweight. Analyst Tami Zakaria raised her target to $180 from $156.

Among those a bit more skeptical, a Cowen team led by Oliver Chen said it remains "on the sidelines but [is] becoming more positively biased." The firm rates RH market perform but raised its target to $155 from $135.

KeyBanc analyst Bradley Thomas rates the stock sector weight. "While RH seems well-positioned for a strong second half, ... investors with a six-to-12-month horizon may prefer a lower valuation, considering elevated competition in the industry," he wrote.

Jaime Katz at Morningstar calls RH shares "modestly overvalued" and said uncertainty is "high." And "current guidance is not widely different from RH's initial 2019 outlook offered in December 2018," he wrote.

And UBS's Michael Lasser says: "While [RH is] benefitting from its new, leaner operating model, we don't think selling, general and administrative dollars can remain flat year over year as it aims to grow and invest."

Meanwhile, at RH, CEO Gary Friedman said in a statement that "[d]espite the increase in tariffs and some negative macro trends, we remain optimistic that our business momentum will continue...,"

For the quarter ended Aug. 3, the company formerly known as Restoration Hardware reported net income of $2.86 a share compared with $2.29 in the year-earlier quarter. On an adjusted basis, net income reached $3.20 a share from $2.01.

Shares outstanding declined to 22.3 million from 27.5 million.

Revenue climbed to $706.5 million from $640.8 million.

A survey of analysts by FactSet produced consensus estimates of profit of $2.66 a share, or an adjusted $2.69, on revenue of $697.1 million.

For the full fiscal year, the company now expects adjusted per-share earnings of $10.53 to $10.76. Its previous estimate was $9.08 to $9.52.

Revenue should come in at $2.68 billion to $2.69 bllion. The previous estimate was $2.66 billion to $2.67 billion.

FactSet's survey was looking for adjusted earnings of $9.43 a share on revenue of $2.67 billion.

"Our largest and most important new gallery, RH New York, continues to trend comfortably in excess of $100 million in annualized revenue" for the full fiscal year, Friedman said. A number of additional galleries are due to open in the fiscal second half, he said.

"Regarding trade with China," the CEO said, "we do not expect the current tariffs to impair our ability to achieve stated financial goals and the impact from the increased tariffs is embedded in our guidance for the year.

"We continue to receive pricing accommodations from vendors and have implemented price increases where necessary with little to no impact to our business."

See Rich Suttmeier's analysis of the charts on RH.