The 2 main mobile stocks to invest in in view of interest rate cuts

The real estate market is in difficulty due to a lack of supply, which keeps prices high, and high interest rates, which weaken demand. Many homeowners are simply opting to keep their homes since selling them would still expose them to high mortgage rates on their next purchase. This has put homeownership out of reach for many, driving up rental costs.

Furniture sales often increase during a slowdown in home buying as homeowners seek to increase the value of their properties through renovation and home improvement projects, but High interest rates make financing purchases more expensive, thus curbing consumer demand. But if interest rates are cut in 2024, as expected, the impact could trigger a surge in furniture purchases. Here are two furniture stocks in the consumer discretionary sector to consider ahead of interest rate cuts.

Havert furniture

Founded in 1885, Haverty Furniture Cos. New York Stock Exchange: HVT offers a wide range of high-quality and elegantly crafted furniture for the middle and upper classes. The company has been conservative with its physical stores: After opening four stores and dropping two in 2023, it currently has just 124 stores and plans to open 4 new ones in 2024-2025. Its stores range in size from 15,000 to 60,000 square feet, averaging about 35,000 feet of compression. In an effort to simplify the decision-making process for its customers, Haverty curates collections to provide a cohesive and visually appealing selection of furniture and accessories that complement each other. Haverty also offers a 3D room planning tool and free design services with its in-house design experts.

Floating

Haverty reported fourth-quarter 2023 EPS of 90 cents, missing consensus estimates by 12 cents. Revenue fell 23.9% year-over-year to $210.74 million, missing consensus estimates of $24.86 million.

CEO Insights

Haverty CEO Clarence Smith reviewed annual sales data reflecting a 17.7% decline in annual sales from 2022 of $862 million, down $132 million. Current sales have returned to pre-COVID levels. The company showed solid expense control in the fourth quarter of 2023. generate higher gross margins and excellent inventory management. The average improvement in ticket sales and high-quality service resulted in a pre-tax margin of 8.7%. Full-year pretax profit was $72.7 million, down from $119.5 million in 2022.

Furniture sales pegged to home sales

Although 2021 was a record-breaking year, the sector was affected in two ways: first by the shift in consumer spending towards services such as travel and entertainment, second by higher mortgage and interest rates, which a significant impact on home sales. Historically, in the South, home sales have been correlated with furniture sales, and low home sales have had a negative impact on consumer interest in purchasing furniture.

Is the bottom in?

Smith believes the bottom has now been reached. “It is now clear that we have experienced a two-year increase in furniture and accessory sales due to COVID and now we have experienced a two-year decline in sales. Our teams have done a great job of reducing costs and reacting to weakening sales trends and adjusting across all areas of our business,” Smith said.

Traces of the market Haverty Furniture analyst recommendations and price targets, as well as the company’s peers and competitors. HVT stock trades at 12.9 times forward earnings.

Daily pattern of the descending triangle

The daily candlestick chart on HVT illustrates a descending triangle pattern. The descending trendline formed at a high of $36.72 on February 15, 2024. The flat-bottomed lower trendline was tested multiple times at $31.04. The HVT is approaching the apex point where a break through the falling upper trend line or a break through the flat lower trend line will occur. The daily relative strength index (RSI) is flat at the 43 band. The pullback support levels are at $31.04, $29.34, $27.31, and $25.74.

La-Z-Boy

Founded in 1927, La-Z-Boy Inc. New York Stock Exchange: LZB is an upholstered furniture company known worldwide for its iconic and patented super comfortable recliners. They also produce sofas, chairs and sofa beds. The company has expanded its supply chain to include 12 distribution centers in the United States and four in Mexico. The company has 349 La-Z-Boy furniture galleries, half of which are franchised, as well as 522 independently owned Comfort Studio stores.

Challenging environment for retail consumers

Not surprisingly, slowing home sales have also impacted La-Z-Boy. It reported fiscal third-quarter 2024 earnings per share of 67 cents, missing analysts’ estimates of 72 cents by five cents. Revenue fell 12.6% year-over-year to $500.4 million, below consensus estimates of $523.09 million. Gross margin increased on a GAAP and non-GAAP basis across all segments.

The company has acquired six independent La-Z-Boy Furniture Galleries, with two more store acquisitions planned in the fiscal fourth quarter of 2024. Same-store written sales for La-Z-Boy Furniture Galleries fell 6% year-over-year , with company-owned stores down 8% amid a challenging consumer environment, partly due to winter weather events.

Guide lowered

La-Z-Boy issued lower guidance with fiscal fourth-quarter 2024 revenues of $505 million to $535 million versus consensus estimates of $544.39 million. Non-GAAP operating margins are expected to be between 7% and 8%.

Melinda Whittington, CEO of La-Z-Boy, said that despite the prolonged industry slowdown, La-Z-Boy is doing well. “We remain optimistic about our industry’s medium- and long-term growth potential, given the structural housing shortage and expectation of improvements in interest rates and housing affordability, and our ability to grow disproportionately with the consumer,” Whittington said.

Daily symmetrical triangle

LZB illustrates a daily symmetrical triangle pattern on its candlestick chart. The descending trend line formed at $39.66 on February 12, 2024. The ascending lower trend line formed at $33.71 on January 18, 2024. LZB fell below the lower trend line but is still hovering around the support level of $35.75 while the daily RSI stopped around the 44-band level. Pullback price support levels are at $33.71, $31.98, $30.00, and $27.62.

Before you consider Haverty Furniture Companies, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Haverty Furniture Companies wasn’t on the list.

While Haverty Furniture Companies currently has a “buy” rating among analysts, top-rated analysts believe these five stocks are better buys.

View the five stocks here