On Thursday, Mizuho has increased the price target for Floor & Decor Holdings, Inc. (NYSE:FND) to $100 from the previous target of $98, while maintaining a Neutral rating on the stock. The adjustment follows the company's third-quarter results, which have seen the stock make modest gains.
The company's performance in western markets has shown signs of improvement, with comparable sales in the region approaching a flat trajectory. This change is perceived as a potential early sign of more favorable trends that could develop over the next three to six months, following a rise in housing turnover.
In a follow-up with Floor & Decor's CEO Tom Taylor and CFO Bryan Langley, several key topics were discussed. First, the company is experiencing a rebound in comparable sales in markets affected by recent hurricanes, without significant replacement demand factored into the fourth-quarter guidance. Second, while management has not set a ceiling for the gross margin rate, they anticipate that the rate of year-over-year gross margin improvement will slow down in future quarters. Lastly, efforts to reduce operating costs for new stores are expected to mitigate the impact of the current challenging sales environment in the near term.
The new price target reflects these considerations, with Mizuho analysts adjusting their estimates slightly upwards. Despite the positive developments, the firm's stance on the stock remains Neutral.
In other recent news, Floor & Decor Holdings reported its third-quarter earnings, which surpassed analyst expectations. The company posted adjusted earnings per share of $0.48, outdoing the consensus estimate of $0.44. However, its revenue of $1.12 billion was slightly below analysts' projections of $1.14 billion, but it still marked a 0.9% year-over-year increase. In the same period, comparable store sales saw a decrease of 6.4%, reflecting the ongoing challenges in the demand for large discretionary home improvement projects. Despite this, the company effectively managed costs to deliver better-than-expected profitability.
Further, Floor & Decor expanded its presence by opening 11 new warehouse stores in Q3, bringing its total to 241 warehouse stores and five design studios. Looking ahead, the company's guidance for the full fiscal year 2024 indicates earnings per share between $1.65 and $1.75 on revenue of $4.4 billion to $4.43 billion, with the EPS guidance midpoint of $1.70 surpassing the current analyst consensus of $1.67.
InvestingPro Insights
Floor & Decor Holdings, Inc. (NYSE:FND) presents a mixed financial picture according to recent InvestingPro data. The company's market capitalization stands at $10.81 billion, reflecting its significant presence in the home improvement retail sector. Despite the challenging sales environment mentioned in the article, FND maintains a robust gross profit margin of 43.26% for the last twelve months as of Q2 2024, indicating strong pricing power and cost management.
However, investors should note that FND is trading at a high P/E ratio of 51.07, suggesting the stock may be relatively expensive compared to its earnings. This aligns with an InvestingPro Tip indicating that the company is "Trading at a high earnings multiple." Additionally, the stock has experienced volatility, with a 1-month price total return of -18.76% as of the latest data, corroborating another InvestingPro Tip that "Stock price movements are quite volatile."
On a positive note, FND has demonstrated profitability over the last twelve months, and analysts predict the company will remain profitable this year. This information supports the article's discussion of potential improvements in western markets and the company's efforts to manage costs in new stores.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Floor & Decor Holdings, providing deeper insights into the company's financial health and market position.
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