On Monday, Baird adjusted its price target for Floor & Decor Holdings, Inc. (NYSE:FND), lowering it to $115 from the previous $127, while keeping an Outperform rating on the stock. The revision reflects a cautious stance towards the company's short-term performance, specifically regarding the second quarter expectations, which may see some negative impact on comparable store sales and overall revenue.
The firm anticipates a challenging operating environment for the home improvement retailer, extending into the fiscal years 2024 and 2025. This outlook is based on a prediction that existing home sales could remain subdued, a factor that typically influences the performance of companies like Floor & Decor.
Despite the reduction in the price target and expectations, Baird's analysis suggests that the recent decline in Floor & Decor's shares, which have fallen approximately 20% to 30% in comparison to various benchmarks since mid-May, may have already accounted for the anticipated challenges. The firm believes that current market prices reflect a significant amount of the negative news.
Baird remains optimistic about Floor & Decor's long-term prospects, considering the issues it faces to be cyclical rather than structural. This distinction implies that the current headwinds are temporary and related to economic cycles, rather than fundamental flaws in the company's business model or market.
The firm encourages investors with a long-term horizon to consider Floor & Decor's potential, as it expects an attractive setup to emerge for those who are willing to endure the current downturn. This perspective is aimed at investors who are prepared to wait for a market recovery and the subsequent benefits it could bring to the company's performance.
In other recent news, Floor & Decor Holdings Inc. reported a first-quarter fiscal 2024 earnings per share of $0.46, surpassing expectations, despite a decline in sales and comparable store sales. The company plans to open 30-35 new stores this year, aiming for a long-term target of 500 stores. Recently, Telsey Advisory Group, Mizuho Securities, UBS, and TD (TSX:TD) Cowen revised their price targets for Floor & Decor.
Telsey anticipates a modest 1.5% year-over-year increase in second-quarter 2024 sales to $1.2 billion, and a contraction in operating margin for the same quarter to 6.7%. Mizuho, UBS, and TD Cowen maintain neutral ratings on the stock, reflecting a wait-and-see approach to the company's performance.
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