Haverty Furniture Companies Is Pushed To Rock Bottom Prices
Haverty Furniture Companies (NYSE: HVT) reported a fabulous 3rd quarter and gave a positive outlook for future results but there are three things weighing on the market. The first is that growth is slowing and that is never a good thing. The YOY revenue growth came in at a double-digit rate but the written sales are only up 2%. That, coupled with an increase in production and deliveries suggests growth may have peaked.
The second is a warning for the 4th quarter. The company’s supply chain is heavily dependent on Vietnam and Vietnam was shut down until just very recently. While inventory is up and supply robust, the company is predicting tighter supply and availability in the latter half of the 4th quarter. That could hurt results. The third factor weighing on prices is the short interest. The shorts have been having a field day with the furniture industry and pushed the short-interest up to over 18%.
The takeaways for us within the report are that revenue is growing on both a YOY and pre-COVId level, setting record highs, and driving robust cash flows. These factors, along with the high 3% dividend yield and uber-low 7X valuation, have the company set up for a major rebound in share prices. The company also reveals supply chain issues are easing and that is good news indeed. In our view, the company is not only set up for a major rebound but to grossly outperform consensus estimates in the coming quarter.
Haverty Furniture Companies Works Hard For Results
Haverty Furniture Companies had a stellar quarter but it was hard-won in the words of CEO Clarence H. Smith. The company reports $260.4 million in consolidated revenue which is good for a gain of 19.7% over last year, 24.4% over 2019, and beat the Marketbeat.com consensus estimate by 28 basis points. 28 basis points isn’t a big number but when coupled with a company record a little sweeter than it could be. The better news is that margins expanded as well, by 60 basis points at the gross level and 140 basis points in terms of SG&A to drive solid bottom-line results as well. The company reported $1.31 in GAAP earnings which is up 35% YOY and beat the consensus by $0.08.
Looking forward, the business should remain strong but may have peaked. The company’s written sales grew 2% sequentially but fell 3.5% YOY at the same time deliveries are ramping. This means the backlog is coming down as well and that means “normalization of business”. The takeaway here is that business is normalizing at record levels and is supporting a robust dividend outlook.
Harvey Furniture Company Is A Cash-Flow Machine
With gross margins of nearly 57%, Haverty Furniture Company is a cash flow machine and likes to return that cash to its shareholders. The company pays a very healthy yield and one that comes with a positive outlook for growth and special dividends. The company paid out a special worth nearly 6.5% with shares trading near $31 and we see another one brewing. Haverty Furniture Company also buys back its stock and repurchased $19.5 million in shares during the quarter.
The Technical Outlook: Haverty Falls To New Low
Shares of Haverty fell more than 3.0% to set a new low in the wake of the Q3 report. The move occurred in after-hours trading and is due in large part to short-sellers so we see the potential for capitulation and reversal in the market. Looking at the indicators, the move to recent support appears to be weak and overblow and today’s drop below support appears to be more of the same. Divergences in both the MACD and stochastic suggest buyers are present. If Haverty cannot regain its footing, however, there is a chance this stock could fall down to the $28 to $24 region.
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