Refreshing Estimates on Culp, Inc. for 1Q22 Report



KEY POINTS
  • Culp reported results for its fiscal 1Q22 beat our estimates for several key metrics: (1) sales, (2) operating income, and (3) earnings per share. In Tables 1 & 2: Review of 1Q2 we provide a detailed comparison of 1Q22. We also show our model, refreshing our quarterly and annual estimates.
  • Consolidated 1Q22 sales were $83.0 MM, up 28.8% versus 1Q21. 1Q22 consolidated sales were 17.4% greater than 1Q20 sales the year before the pandemic. By our math, 1Q22 sales accounted for ~$0.03 improvement Y/Y in adjusted EPS. 1Q22 sales also beat our $77.4 MM estimate (~$0.01 EPS beat versus our estimate).
  • 1Q22 operating income grew Y/Y to $3.3 MM versus $1.9 MM in 1Q21 and versus our $2.9 MM estimate. 1Q22 operating margin was 4.0% versus 2.9% in 1Q21 and our 3.8% estimate. The improved operating profit boosted Y/Y EPS by $0.07 and to our estimate by ~$0.02. Expense control and sales growth aided operating profit and margin. Inflation, however, pressured gross margin.
  • Versus both the 1Q21 $0.08 non-GAAP EPS and our $0.13 estimate, 1Q22 EPS was $0.18. A lower-than-forecast tax rate aided the beat versus our estimate (28.7% vs. 35%; +~$0.02 / share). A lower-than-forecast other expense also accounted for ~$0.01 per share.
  • Drilling down by segment, Culp's upholstery fabric (CUF) segment sales grew by 41.0% versus 1Q21 to ~$40.0 and by 25.5% versus 1Q20. CUF sales beat our $36.2 million estimate by ~$3.8 million. Inflation caused CUF operating profit to miss our estimate by ~$450 K. The miss was in gross margin; operating expenses were well controlled.
  • Culp's mattress fabric segment (CHF) 1Q22 sales were ~$43.1 MM, +19.3% versus 1Q21 and 10.8% above 1Q20. Versus last year, CHF operating profit grew by ~96% to $3.6 MM. CHF operating profit beat our estimate by ~$830 K. Irrespective, inflation impacted CHF results.
  • Despite uncertainties, management was encouraged by its product-driven strategy, expanding reach, and global platform resilience. It expects 2Q22 sales and operating income to be flat to 1Q22 results. While a moderation versus earlier expectations, it still expects 2022 net sales to rise "moderately" +8% to 12%) and operating income to increase "significantly," by 20%-25%, Y/Y.

ESTIMATES AND VALUATION

Culp reported results for its fiscal 1Q22 beat our estimates for several key metrics: (1) sales, (2) operating income, and (3) earnings per share. In Tables 1 & 2: Review of 1Q2 we provide a detailed comparison of 1Q22. We also attach our model, refreshing our quarterly and annual estimates.

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