Williams-Sonoma Q3 Earnings: Can WSM Hit Its $1.02 EPS Target?

in EARNINGS/INVESTING IDEAS by

Williams-Sonoma, Inc. (NYSE:WSM) is scheduled to report Q3 earnings results on November 21, 2019, at 05:00 PM ET. The company is expected to report earnings of $1.02/share on revenue of $1.413 billion. The consensus earnings per share (EPS) of $1.02/share is based on a poll of 22 analysts and represents a growth of 7.4% over the same quarter last year when the company reported earnings of $0.95/share.

The revenue forecast of $1.413 billion based on a poll of 20 analysts implies a year-over-year (YoY) growth of 4.1%. Last year the company reported $1.357 billion in revenue for the quarter.

Expected to report EPS growth of $0.07/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $1,413.20 $1,356.98 4.1%
EPS $1.02 $0.95 7.4%

In the most recent investor presentation, the company positions itself as a “digital-first company with retail stores as a competitive advantage.” The company has managed to grow revenues while maintaining gross margins above 35%. Revenue growth is largely attributable to the online company’s success as it now boasts >55% of sales are through e-commerce channels with 10% e-commerce comp growth year-to-date.

Williams-Sonoma Revenues Gross Margin-WatermarkedSource: Finbox

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters and met expectations 1 quarter. What are your expectations from Williams-Sonoma for earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.83 $0.87 4.8% Beat
Q1, 2020 $0.68 $0.81 19.0% Beat
Q4, 2019 $1.97 $2.10 6.8% Beat
Q3, 2019 $0.94 $0.95 0.5% Beat
Q2, 2019 $0.68 $0.77 13.2% Beat
Q1, 2019 $0.58 $0.67 15.5% Beat
Q4, 2018 $1.60 $1.68 5.0% Beat
Q3, 2018 $0.84 $0.84 0.0% Meet

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Williams-Sonoma’s stock price performance? It’s more important for some companies than for others.

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending August 4, 2019, the stock price reacted by falling by -6.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-28 $68.40 $64.16 -6.2% Decline
2019-05-30 $51.13 $58.50 14.4% Increase
2019-03-20 $56.74 $59.22 4.4% Increase
2018-11-15 $61.78 $53.76 -13.0% Decline

Fundamentals And Technical Analysis

Williams-Sonoma is currently trading at $69.50/share, up 1.3% for the day. The company is trading at approximately 97% of its 52-week high of $71.63/share. The company’s stock price is up 8.3% since the last earnings report but down -3.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 69.60 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 16.2x and a forward P/E multiple of 15.2x. Williams-Sonoma’s current share price also implies a price-to-book (P/B) multiple of 5.1x. The following table summarizes some other key fundamental ratios:

Data as of November 21, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 4, 2019
Stock Price (Current) $69.50
P/E Ratio 16.2x
P/E Ratio (Fwd) 15.2x
PEG Ratio 8.6
Total Debt to Capital (%) 23.3%
Levered Free Cash Flow $252 million
Enterprise Value / EBITDA 11.2x

Source: Finbox

Company Profile: Williams-Sonoma, Inc.

Williams-Sonoma, Inc. is a mid-cap stock with a market capitalization of $5.352 billion and a total enterprise value of $6.963 billion. The company operates in the Consumer Discretionary sector and Specialty Retail industry.

Williams-Sonoma, Inc. operates as a multi-channel specialty retailer of various products for the home. The company operates through two segments, E-commerce, and Retail. It offers cooking, dining, and entertaining products, such as cookware, tools, electrics, cutlery, tabletop and bar, outdoor, furniture, and a library of cookbooks under the Williams Sonoma brand, as well as home furnishings and decorative accessories under the Williams Sonoma Home brand; and furniture, bedding, bathroom accessories, rugs, curtains, lighting, tabletop, outdoor, and decorative accessories under the Pottery Barn brand.

The company also provides home decor products under the West Elm brand; products designed for creating spaces where children could play, laugh, learn, and grow under the Pottery Barn Kids brand; and line of furniture, bedding, lighting, decorative accents, and others for teen bedrooms, dorm rooms, study spaces, and lounges under the PBteen brand. In addition, it offers a range of assortments of lighting, hardware, furniture, and home décor inspired by history under the Rejuvenation brand; and women’s and men’s accessories, small leather goods, jewelry, key item apparel, paper, entertaining and bar, home décor, and seasonal items under the Mark and Graham brand.

The company markets its products through e-commerce Websites, direct mail catalogs, and retail stores. As of February 3, 2019, it operated 625 stores comprising 579 stores in 43 states, Washington, D.C., and Puerto Rico; 24 stores in Canada; 19 stores in Australia; and 3 store in the United Kingdom, as well as 108 franchised stores, as well as e-commerce Websites in various countries in the Middle East, the Philippines, Mexico, and South Korea.

Williams-Sonoma, Inc. was founded in 1956 and is headquartered in San Francisco, California.

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