Key Points
La-Z-Boy beat on sales and earnings last night.
Profit margins declined, however, and Q4 guidance was a bit light.
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La-Z-Boy (NYSE: LZB) stock tumbled 7.3% through 10:20 a.m. ET Wednesday despite beating on both sales and earnings last night.
Heading into the company's fiscal Q3 2026 report, analysts expected La-Z-Boy to earn $0.59 per share on $535.4 million in sales. La-Z-Boy actually earned $0.61 per share on sales of $541.6 million.
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La-Z-Boy Q3 earnings
La-Z-Boy grew its sales 4% year over year in Q3, with retail sales up 11% but wholesale only 1%. Earnings, however, were more of a disappointment than met the eye. While La-Z-Boy "beat earnings," its earnings under generally accepted accounting principles (GAAP) were only $0.52 per share -- not $0.61, which was a non-GAAP number.
Non-GAAP profits declined 10% year over year despite the sales increase. GAAP profits fell 24%, as La-Z-Boy's operating profit margin contracted 120 basis points to just 5.5%.
Is La-Z-Boy stock a buy?
The good news is that La-Z-Boy remains profitable, and its free cash flow is still on the incline. La-Z-Boy has generated $119 million so far in the first nine months of its fiscal 2026, up 61% year over year. Management hasn't said precisely what it expects to generate in Q4. It did forecast, however, that revenue will continue to rise sequentially to at least $560 million and that non-GAAP operating margins will improve.
This implies continued momentum in FCF generation. If we run rate out the money La-Z-Boy has generated so far this year, therefore, the company looks on course to generate at least $158 million in free cash flow this year. On a $1.5 billion market capitalization, that works out to a price-to-free cash flow ratio of less than 10.
Factor in a tidy 2.6% dividend yield, and La-Z-Boy stock looks comfortably cheap to me today.
Should you buy stock in La-Z-Boy right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
