Seeking Alpha
Long/short equity, deep value, special situations, growth
Profile| Send Message|
( followers)  

Summary

  • The company missed on both the top and bottom lines.
  • After a large slide, we feel the company is now fairly valued and taper our bearish thesis.
  • We didn’t anticipate the recent quarterly miss, but note that it helped drive the stock down to our fair value.

Haverty Furniture (NYSE:HVT) posted 2Q earnings results that had earnings coming in at $0.21 a share (missing $0.22 consensus) and revenues marginally missed as well. Shares fell as much as 12.5% on the earnings news. But sales were up 2.4% y/y for the quarter, comparable store sales were up 3.2%, and gross profit margin expanded by 40 basis points to 53.8%. Consensus for full year 2014 has come down by roughly 5% over the last 30 days.

Since we first covered Haverty back in March, shares are down 18%. At the time we noted that the company looked attractive on a multiples basis, but that its poor cash flow generation suggested fair value was $22, stating,

The 1.2% forward dividend yield isn't enough to keep investors interested in Haverty just for the income. All in all, Haverty's valuation is too rich, and the company's need to have near perfect execution is too great to warrant an investment today. Yet, with its solid balance sheet and 8% net cash-to-market cap, it's worth keeping an eye on Haverty on any pullback towards $22.

Shares are now trading close to our fair value, but we also note that the company's move toward digital tool and free design services could drive sales higher in the interim.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: Haverty Furniture Earnings

Check out Seeking Alpha’s new Earnings Center »