Why Lumber Liquidators Holdings (LL) Stock Is Diving This Morning

NEW YORK (TheStreet) -- Shares of Lumber Liquidators Holdings Inc. (LL) are falling -20.62% to $55.90 in pre-market trading on Thursday after the company announced it cut its earnings outlook for the full year 2014.

The hardwood flooring, and accessories retailer is expecting full year 2014 earnings per diluted share between $2.65 and $3.00, compared to its previous guidance of $3.25 to $3.60.

Lumber Liquidators is expecting net sales for 2014 to be between $1.05 billion and $1.10 billion versus its original estimate of revenue between $1.15 billion and $1.20 billion.

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Additionally, Credit Suisse (CS) downgraded Lumber Liquidators to "neutral" from "outperform," and cut its price target on the stock to $65 from $100, due to its new full year 2014 guidance, and concern regarding a slowdown in growth.

Separately, TheStreet Ratings team rates LUMBER LIQUIDATORS HLDGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate LUMBER LIQUIDATORS HLDGS INC (LL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LL's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 6.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, LUMBER LIQUIDATORS HLDGS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 101.50% to $22.30 million when compared to the same quarter last year. In addition, LUMBER LIQUIDATORS HLDGS INC has also vastly surpassed the industry average cash flow growth rate of -3.80%.
  • 41.12% is the gross profit margin for LUMBER LIQUIDATORS HLDGS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.56% trails the industry average.
  • LL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.72 is somewhat weak and could be cause for future problems.
  • You can view the full analysis from the report here: LL Ratings Report
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