Haverty Furniture Company Is Ready To Spring Higher
Haverty Furniture Company is a deep value for dividend growth investors and ready to spring higher.
Haverty Furniture Company Sustains Growth
If you were wondering if Haverty Furniture Company (NYSE: HVT) is still a good bUy the answer is a resounding yes. The company is one of the best run in an industry fueled by pandemic trends and sustained by high demand for housing and lifestyle improvements. Not only is the balance sheet a fortress but it has been getting stronger over the past year casting a bright light on the dividend outlook. Havertys is one of the higher-yielding stocks in our coverage universe that yields 2.6% and is one with a high probability for double-digit distribution increases this year.
Haverty Furniture Company Comfortably Exceeds All Expectations
We've mentioned this before and feel it important to note that the furniture company was well-positioned for the pandemic for two reasons. The first is the Trump/Xi Trade War, an event that sparked supply chain adjustments that included domestication of previously outsourced production. The second was the pandemic itself, the pandemic unleashed a tidal wave of consumer spending focused on home improvement that has years to run out.
Haverty Furniture Company reported $250 million in net consolidated revenue for a gain of 127% from last year. This is a very easy comp as most of Haverty’s stores were closed for the majority of the quarter but there are two details that reveal the company's fundamental strength. The first is that Q2 Revenue beat the consensus by 1460 basis points, the second is that revenue is up 30% over the last two years. On a comp-store sales basis, sales are up 50% and are supported by a large backlog and an 18% increase in written sales. Notably, the company says that much of its traffic has shifted to in-stock merchandise which has helped them work down the backlog.
Moving down the report, the company reports a 240 basis point improvement in gross margin and a 2000 basis point improvement in SG&A expense as a percentage of sales. These results are due to the company's efforts to mitigate inflationary pressures and raw material shortcomings as well as internal cost controls enacted as part of a long-term strategy. The gross margin came in at 56.6% of sales and is expected to run in this range for the remainder of the year.
On the bottom line, the company's GAAP eps of $1.21 is up $0.49 from last year and beat the consensus by 4700 basis points driving strong cash flow for the company. The company says cash from ops more than doubled to $57 million and was used for buybacks, dividend increases, and to improve the balance sheet. The company’s cash on hand is now over $253 million or up $40 million from the end of the year and there is no long-term debt.
Haverty Furniture Company Is A Dividend You Can Bank On
Haverty reduced its dividend at the peak of the COVID crisis in an effort to preserve the balance sheet and those efforts paid off. Since then, the business has bounced back enough that the company reinstated it to the previous payout, then increased it again, and paid out a special dividend that was worth 5.25% with shares trading at the current $38.25. Based on the earnings, the outlook, the cash flow, and the balance sheet, we expected to see this company increase the dividend for a seventh consecutive year later this year and see a high probability for another special dividend as well.
The Technical Outlook: Havertys Is Poised To Rocket Higher
The Haverty chart is interesting because price action has pulled back over the past few months and now looks overextended. That plus the 15% short interest has the stock set up for a big rally that should be sparked by the Q2 report. Assuming price action does move higher there is a chance for resistance just above the $41 level but, once that has been surpassed, we see this stock moving up to retest the all-time highs very soon. A move up to the $52 level from the current price action would be worth about 37%. Regardless, the stock is trading at less than 9X its forward earnings and pays 2.6%, it is a deep value and a great buy.