RL: Quick Take

Execution, execution, execution… Numbers are heading higher – as is the stock. Still one of my favorites.

Clean beat. $1.58 vs. my $1.36 and the Street at $1.24. If there’s one thing I need to see, it is that sales were +10% and inventories were -3%. Cash flow algorithm looks solid: sales +10%, gross profit +13%, EBIT +26%, capex was down 40%, and stock repo accelerated by 3x sequentially.

In typical RL fashion, the company threw out a cautionary flag to keep estimates in check. I’d be intellectually dishonest if I called it a complete sandbag. The fact is that things simply are not good out there. But as I’ve noted over the past few days, and months, this company has more levers to pull than any other in the space. It probably does itself no justice by taking up numbers right now. I’m inclined to go towards $4.35 for the year unless I hear compelling evidence on the call to suggest otherwise.

Check out our margin walk from 2 days ago showing the detailed puts and takes in this model.