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Omar Venerio
Omar Venerio
Articles (1708) 

Thursday Morning Market Highlights

Markets in the red, shares of RH jump after better-than-expected results

US Markets

U.S. stocks were in the red on Thursday on news that initial jobless claims were unchanged at a seasonally adjusted 884,000 in the week of Aug. 30 to Sept. 5. The Dow fell 0.19% to 27,888, the S&P 500 index dipped 0.09% to 3,395 and the Nasdaq Composite Index was up 0.13% to 11,156.

Gainers

• Tyson Foods Inc (NYSE:TSN) +5%

• Las Vegas Sands Corp (NYSE:LVS) +3.2%

• Amcor PLC (NYSE:AMCR) +2.6%

• Carnival Corp (NYSE:CCL) +2.5%

• Universal Health Services Inc (NYSE:UHS) +1.9%

• Chipotle Mexican Grill Inc (NYSE:CMG) +1.8%

Losers

• Occidental Petroleum Corp (NYSE:OXY) -4.8%

• EOG Resources Inc (NYSE:EOG)​ -4.8%

• Devon Energy Corp (NYSE:DVN) -4.3%

• Hess Corp (NYSE:HES) -2.4%

• Eli Lilly and Co (NYSE:LLY) -2.3%

Global Markets

The main European stock markets traded in the red. The UK's FTSE 100 fell 0.34%, France's CAC 40 slid 0.58%, Germany's Dax was down 0.38% and Spain's Ibex 35 lost 0.70%.

In Asia, Japan's Nikkei 225 gained 0.88%, India's BSE Sensex advanced 1.69%, Hong Kong's Hang Seng lost 0.64% and China's Shanghai Composite was down 0.61%.

RH releases earnings report

Shares of RH (NYSE:RH) jumped more than 23% on Thursday morning after the company announced its second-quarter results the previous day. The company posted earnings per share of $4.90, beating analysts' estimates by $1.56. Revenue of $709.28 million grew 0.4% year-over-year and also beat expectations by $8.4 million.

The adjusted gross margin expansion was 550 basis points to 47.5%, higher than the 42.0% from last year. Further, the adjusted operating margin reached 21.8%, up 690 basis points from last year's 14.9%.

The free cash flow was $218 million, up from $109 million last year. During the quarter, the company repaid $300 million in convertible notes due July 15, ending the quarter with total net debt of $697 million. The ratio of total net debt to trailing twelve months adjusted Ebitda was 1.3.

Looking ahead to full fiscal year 2020, the company expects an adjusted operating margin of 20% and mid single-digit sales growth. Also, long term growth targets were revised. Net revenue growth is expected to be in the range of 8% to 12%, adjusted operating margins in projected in the low to mid twenties and adjusted net income growth is projected to be between 15% and 20%.

During the quarter, Joel Greenblatt (Trades, Portfolio) cut his investment in the company by 70% for a remaining holding of 23,337 shares.

Disclosure: The author holds no positions in any stocks mentioned.

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About the author:

Omar Venerio
Omar Venerio is a capital markets, derivatives, corporate finance and financial management professor and Area Head of Finance. He is passionate about the stock market and providing independent fundamental research and hedge fund and insider trading-focused investigation.

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