Don’t Sleep on La-Z-Boy

Written by GSCR Staff   
Wednesday, 02 November 2016 06:34

In Monday’s Guide, we alluded to a sleepy sideways stock market with a great image of Sleepy dwarf. We think things will pick up, particularly since political certainty is less than a week away. On a lighter note, this World Series has been the most exciting in recent memories, if not merely for the two franchises in it, both of whom have suffered decades of futility. While we are talking about sleep, coincidentally, the Indians’ first baseman, Mike Napoli, underwent surgery to correct sleep apnea a year ago. A common problem that many people ignore, but we digress…

Speaking of rest and relaxation, La-Z-Boy Incorporated (NYSE – LZB - $22.75) is a stock we began to cover nearly two years ago in the Market Monitor. Below is the one year chart that illustrates that LZB may be reaching a buying point in a trough per a head-and-shoulders technical measure.

LZB 1-Year

(Source: www.otcmarkets.com)

MM.11.02.16.LZB-1yr

La-Z-Boy is a household name, particularly when it comes to making recliners custom unwind and watch great sporting events like the World Series. The Company manufactures, markets, imports, exports, distributes, and retails upholstery furniture products, accessories, and casegoods furniture products in the United States, Canada, and internationally. The Company also produces reclining chairs; and manufactures and distributes residential furniture in the United States. It operates through Upholstery, Casegoods, and Retail segments. The Upholstery segment manufactures or imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans, and sleeper sofas. This segment sells its products directly to La-Z-Boy Furniture Galleries stores, operators of Comfort Studios and England custom comfort center locations, dealers, and other independent retailers. The Casegoods segment manufactures, imports, markets, and distributes casegoods furniture, including bedroom sets, dining room sets, entertainment centers and occasional pieces, and upholstered furniture. This segment sells its products to dealers, La-Z-Boy Furniture Galleries stores, and other independent retailers under the American Drew, Hammary, and Kincaid brand names. The Retail segment sells upholstered furniture, casegoods, and other accessories to the end consumer through its retail network.

EPS performance has been even more paramount in pops over the last several quarters. La-Z-Boy has hit or surpassed estimates two of the last four quarters. On the technical front a short float of 4% indicates strong conviction for the longs. Additionally, the Company has $132 million cash on hand with only $714 thousand in debt as of the end of 2Q16. Finally, profit margin of 5% and operating margin of 8% are both 1% higher than the industry averages respectively.

LZB remains a strong long term buy and hold. Wall Street Analysts’ consensus forecast 4.5% revenue growth for 2017. We like a $26 target in 2Q17.

Have a great day!

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