On Friday, Citi increased its price target for Floor & Decor Holdings, Inc. (NYSE:FND) to $119 from the previous $74, while keeping a Neutral rating on the stock. The adjustment follows the company's fourth-quarter earnings release, which revealed a strong beat on earnings per share compared to Wall Street expectations. This performance was attributed to better-than-expected sales, driven by an increase in transactions and effective margin management.
Despite the positive earnings, Floor & Decor provided initial guidance for the fiscal year 2024 earnings per share in the range of $1.75 to $2.05, which is below the consensus estimate of $2.19 but roughly aligns with market predictions of around $1.80.
The company's guidance is notably dependent on a stronger performance in the second half of the year, anticipating positive same-store sales in the fourth quarter, a situation that mirrors the previous year's forecast which ultimately did not come to fruition.
Citi's analyst pointed out that opinions on Floor & Decor's stock are likely to remain polarized. Supporters of the stock, referred to as bulls, are prepared to look past the anticipated rough patch in 2023 and 2024, expecting a recovery over multiple years as mortgage rates decrease and the volume of existing home sales improves.
On the other hand, skeptics, or bears, might be anticipating the second half of the year for potential shortfalls in same-store sales before changing their stance.
Currently, shares of Floor & Decor are trading at a significant premium compared to their historical average. The analyst's neutral position reflects a wait-and-see approach, suggesting that despite the company's strong quarterly performance, the market should remain cautious due to the uncertain outlook for the latter half of the fiscal year.
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