Lumber Liquidators Holdings Inc.
(
LL
) recently posted robust second quarter results, including
year-over-year earnings growth of 126.3% and a positive earnings
surprise of 48.3%. Such results prompted this specialty retailer of
hardwood flooring to raise its full year guidance.
The strong results and upbeat outlook helped this Zacks #1 Rank
(Strong Buy) reach a new 52-week high of $43.51 on July 26, before
closing at $42.55. So far this year, LL has amassed an impressive
return of 144.8%.
Fabulous Quarter, Upbeat Guidance
On July 25, Lumber Liquidators announced second quarter earnings of
43 cents per share, topping the Zacks Consensus Estimate of 29
cents and increasing substantially from 19 cents in the previous
year. The improvement was on the back of strategic initiatives
undertaken by management, which include augmenting the top line,
driving traffic and optimizing the supply chain.
Net sales jumped 19.9% over the prior-year quarter to $210.3
million, and surpassed the Zacks Consensus Estimate of $196
million. Comparable-store sales grew 12.4%, supported by a 5.8%
rise in the number of customers. Gross margin expanded 330 basis
points (bps) to 37.3%, benefiting from lower product and
transportation costs. Operating margin grew 450 bps to 9.4%.
Buoyed by better-than-expected results, management raised its full
year sales guidance to between $750 million and $775 million from
the earlier outlook of $720 million to $750 million.
Comparable-store sales are now expected to rise in the mid-single
digits. Earnings are projected between $1.30 and $1.42 per share,
up from the previous range of $1.10 to $1.25. The company expects
to open 20-25 new stores over the course of the year.
Decent Earnings Estimate Revisions
In the past 7 days, the Zacks Consensus Estimate for 2012 rose 13%
to $1.39 per share on the back of upward revisions in 4 out of 5
estimates. The current estimate, which lies close to the high end
of management's guidance range, implies a year-over-year growth of
49.9%.
For 2013, the Zacks Consensus Estimate is $1.49 per share,
exhibiting an increase of 2.1% in the last 7 days, aided by 3
upward revisions out of 11 estimates. The current estimate suggests
a year-over-year growth of 7.2%.
Valuation Reflects Fundamental Strength
Lumber Liquidators currently trades at a forward P/E of 30.5x,
reflecting a 33.4% premium to the peer group average of 22.9x.
Also, on a price-to-book basis, shares trade at 5.5x, a substantial
premium to the peer group average of 2.1x. Given the company's
compelling fundamentals, the premium valuation is justified and
well supported by its long-term estimated EPS growth rate of 17.5%.
With respect to return on equity (ROE), the stock looks attractive.
It has a trailing 12-month ROE of 13.8%, which is above its peer
group average of 12.9%. This implies that the company reinvests its
earnings more efficiently than its peer group.
Chart Echoing Strength
Shares of Lumber Liquidators had been trading in the range of
approximately $17.00 to $34.00 since the beginning of this year. It
broke that range on July 25, when shares soared 26.8% on
stronger-than-anticipated second quarter results. The stock has
been consistently trading above its 200-day moving average since
January 17, 2012. It has also remained above the 50-day moving
average since February 23, 2012.
Volume is fairly strong, averaging roughly 684K daily. Lumber
Liquidators, which competes with Lowe's Companies Inc. (
LOW
) and The Home Depot Inc. (
HD
), has outperformed the S&P 500 since the end of February 2012.
The year-to-date return for the stock is 144.8% compared with the
S&P 500's return of 6.5%.
Founded in 1994 and headquartered in Toano, Virginia, Lumber
Liquidators Holdings operates as a multi-channel specialty retailer
of hardwood flooring and hardwood flooring enhancements and
accessories. The company operated 277 stores across 46 states in
the U.S. and 7 outlets in Canada, as of June 30, 2012. The company
has a current market cap of $1.17 billion.
LUMBER LIQUIDAT (LL): Free Stock Analysis
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