4 Top Furniture Industry Securities To Buy Amid The Solid Housing And R&R Trend


Increased investment in residential buildings along with advancements and technological solutions is expected to drive the growth of the Zacks furniture industry. Although spikes in COVID-19 cases, continued investments in e-commerce and intense competition may keep margins under pressure, an improved scenario for the US housing market, product innovation and buyouts accretive should favor the furniture industry. Outside of these headwinds, effective cost management should support Bassett Furniture Industries, Incorporated (BSET), American Woodmark Corporation (AMWD), La-Z-Boy Incorporated (LZB) and Sleep number company (SNBR).

Industry Description

The Zacks furniture industry includes manufacturers, designers and distributors of residential and commercial furniture solutions. Some of the companies supply kitchen and bathroom cabinetry as well as various engineered components and products in the United States and international markets. A few industry players also offer specialized rental services, such as modular and portable storage solutions.

Industry players cater to different sectors, namely construction, energy, health, safety, government, retail, commerce, education and transport.

3 trends shaping the future of the furniture industry

Strong residential, repair and renovation market: Improving US housing market fundamentals make the near-term outlook encouraging for the furniture industry. Continued declines in mortgage rates have boosted new home sales, which in turn should boost demand for home furnishings in the near term. Meanwhile, work-from-home or stay-at-home orders amid the COVID-19 pandemic have encouraged consumers to take on more home improvement projects. Thus, significant investments in renovation should brighten the market outlook.

Innovation, Digital Marketing & Acquisitions: Product innovation plays a decisive role in gaining market share in this industry. Players are investing in new products to improve the product line in a competitive landscape and drive revenue growth. In addition, millennials represent the largest cohort of consumers in the furniture market. More money in the hands of this larger and more active generation of buyers should keep demand high. Additionally, the customer experience is enhanced through innovative marketing techniques, with a focus on digital marketing, better merchandising, store remodeling and loyalty programs. In addition, industry players like Leggett & Platt, Incorporated (LEG) and others are pursuing acquisitions to expand their product portfolio and expand their geographic footprint as well as market share.

Coronavirus-induced disruption, fierce competition and higher costs: Industry participants have been hit hard by the coronavirus-induced disruption that has affected business operations, global supply chains and international trade in general. In addition, the furniture industry is very competitive with furniture retailers, department stores and antique dealers struggling. Again, businesses need to make additional investments to cope with an expanding omnichannel environment as shoppers tend to search for options online. Growth in online sales will continue to shrink the market share of traditional furniture retailers as brands such as Etsy, Things Remembered, Costco and Amazon enter the market. Meanwhile, industry players are plagued by rising raw material prices, logistics expenses and labor costs. In addition, the volatility of lumber prices is a major concern.

Zacks’ Industry Rankings Shows Bright Prospects

Zacks Furniture Industry is a group of seven stocks within Zacks’ larger consumer discretionary sector. The industry currently holds a Zacks Industry Rank # 25, which places it in the top 10% of over 250 Zacks industries.

The group’s Zacks Industry Rank, which is essentially the average Zacks Rank of all member stocks, indicates a lucrative outlook in the near term. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of industries ranked by Zacks is the result of positive earnings prospects for all of the constituent companies. Looking at revisions to overall earnings estimates, it appears that analysts are gradually gaining confidence in the earnings growth potential of this group. As of October 2020, industry profit estimates for 2021 have been revised upward by 2.1%.

Before we feature a few stocks that you might want to consider for your portfolio, let’s take a look at the recent stock market performance and industry valuation.

Industry lags behind the sector and the S&P 500

The Zacks furniture industry has underperformed the broader Zacks consumer discretionary sector as well as the Zacks S&P 500 composite over the past year.

During this period, the industry gained 4.1% compared to the 16.4% increase of the S&P 500 and the 13.6% growth of the sector at large.

One-year price performance

Current industry assessment

Based on the 12-month forward price-to-earnings (P / E) ratio, which is commonly used to value furniture inventories, the industry is currently trading at 17.8X versus the 23X of the S&P 500 and the 33 , 8X of the sector.

Over the past five years, the industry has traded as low as 17.8X and as low as 9.4X with the median being 15.3X, as shown in the chart below.

Industry P / E Ratio (12-month futures) vs. S&P 500

4 furniture stocks to buy now

We have selected four stocks from the Zacks furniture universe that are currently ranked 1 (strong buy) or 2 (buy) from Zacks. You can see The full list of today’s Zacks # 1 Rank stocks here.

Bassett Furniture Industries, Incorporated: Based in Bassett, Virginia, this company manufactures, markets and sells home furnishings in the United States and around the world. Although the COVID-19 unrest continued to disrupt the company’s day-to-day operations during the period, the company’s wholesale operations benefited from Bassett Design Centers and the Club Level movement program, expanding its market share with the community of independent furniture stores, in particular with Club Level. assortment. Its Corporate Retail unit has benefited from digital awareness strategies. In addition, its focus on the “Made in America” strategy bodes well. He has designed product designs that will take advantage of the national supply chain and manufacturing prowess.

The stock has gained 29.3% in the most recent year, surpassing the industry’s 4.1% gain. The company currently has a Zacks # 1 ranking and has an expected profit growth of 413.6% for fiscal 2021. The Zacks consensus estimate for its earnings for fiscal 2021 has increased by 43.8% over the course of the year. of the last 30 days.

Price and consensus: BSET

American Woodmark Corporation: Based in Winchester, Virginia, this Zacks Rank # 2 company manufactures and distributes products for the kitchen, bathroom and home organization. The strong momentum of the R&R activity should stimulate the growth of American Woodmark. Its activities as reception center and independent dealers and distribution are showing solid growth.

Although the stock has fallen 6.3% in the past year, Zacks’ consensus estimate for its 2021 earnings has risen 1.1% in the past 30 days, illustrating the optimism of analysts about the company’s outlook. The company forecast earnings growth of 7.4% for fiscal 2021.

Price and consensus: AMWD

La-Z-Boy Incorporated: Based in Monroe, MI, this Zacks Tier 2 company manufactures, markets, imports, exports, distributes and retails home furnishings, accessories and home furnishings. The higher discretionary spending on home furnishings was a blessing for La-Z-Boy. In addition, lower expenses boosted its margins.

The stock has gained 35.5% in the past year. The company expects earnings growth of 26.4% for fiscal 2021. Zacks’ consensus estimate for its fiscal 2021 earnings has risen 27.6% in the past 30 days.

Price and consensus: LZB

Sleep number company: Based in Minneapolis, MN, this Zacks Rank # 1 company provides sleep solutions and services in the United States. It is reaping the rewards of the high demand for its smart beds. The company has demonstrated the resilience of its vertical business model through its performance in terms of turnover and profit. The company has accelerated its strategic initiatives, strengthened its competitive advantages and created significant value for its customers, team, business partners and shareholders.

The stock has gained 90.4% in the past year. The company currently holds a Zacks # 2 rank and has an expected earnings growth of 6.4% for 2021. The Zacks consensus estimate for its 2021 earnings has risen 3.6% in the past 60 days.

Price and consensus: SNBR

More stock news: it’s bigger than the iPhone!

She could become the mother of all technological revolutions. Apple has only sold one billion iPhones in 10 years, but a new breakthrough is expected to generate over 27 billion devices in just 3 years, creating a market of $ 1.7 trillion.

Zacks has just published a special report that highlights this rapidly emerging phenomenon and 6 tickers to take advantage of it. If you don’t buy now, you could get started in 2021.

Click here for the 6 professions >>

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

Sleep Number Corporation (SNBR): Free Stock Analysis Report

LaZBoy Incorporated (LZB): Free Stock Analysis Report

Leggett & Platt, Incorporated (LEG): Free Stock Analysis Report

Bassett Furniture Industries, Incorporated (BSET): Free Stock Analysis Report

American Woodmark Corporation (AMWD): Free Stock Analysis Report

To read this article on Zacks.com, click here.

Zacks investment research

Leave A Reply

Your email address will not be published.