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Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.</li><li>This note incorporates that filing and introduces our reformatted earnings model. We hope the revised model and reformatting will be easier to read and understand.</li><li>As is our custom, our working excel models are available to our readers on request. </li></ul>

After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.This note incorporates that filing and introduces our reformatted earnings model. We hope the revised model and reformatting will be easier to read and understand.As is our custom, our working excel models are available to our readers on request. 

Culp, Inc. - Introducing Updated Model; FY24 Estimates Unchanged

<ul><li>We are revising our earnings estimates following Culp’s 2QFY24 earnings release and conference call.</li><li>Management’s 3QFY24 guidance suggests that our prior estimate was overly optimistic about the pace of improvement.</li><li>The objective of operating profitability by 4Q remains intact and achievable. We expect, and are modeling, positive net income in FY25.</li></ul>

We are revising our earnings estimates following Culp’s 2QFY24 earnings release and conference call.Management’s 3QFY24 guidance suggests that our prior estimate was overly optimistic about the pace of improvement.The objective of operating profitability by 4Q remains intact and achievable. We expect, and are modeling, positive net income in FY25.

Culp, Inc. - Revising Estimates After 2QFY24 Positive Surprise

<ul><li>Culp, Inc. issued results for its 2QFY24 on Monday, December 4 after market close.</li><li>Revenue and operating profit were better for the just-reported quarter than those posted in 2QFY23 and our estimates, bolstering management’s contention that it would deliver—and investors would witness—sequential quarterly improvements in operating profitability for the balance of FY24.</li><li>Management also noted its belief of posting positive consolidated operating profitability by 4QFY24.</li></ul>

Culp, Inc. issued results for its 2QFY24 on Monday, December 4 after market close.Revenue and operating profit were better for the just-reported quarter than those posted in 2QFY23 and our estimates, bolstering management’s contention that it would deliver—and investors would witness—sequential quarterly improvements in operating profitability for the balance of FY24.Management also noted its belief of posting positive consolidated operating profitability by 4QFY24.

Culp, Inc.-  Culp Reports Improved 2QFY24

<ul><li>Herein we revise our estimates for Culp, which reported 1QFY24 results and issued guidance in the face of continued weak demand juxtaposed against improving and better-than-expected margins.</li><li>Gross margin for CHF, Culp’s mattress fabrics segment, is recovering faster than expected (up ~700 bps in 1QFY24 versus 1QFY23).</li><li>For CUF, Culp’s upholstery fabrics segment, management grew 1QFY24 gross margin by 667 bps despite a significantly down Y/Y sales comparison (~ -17.4%).</li></ul>

Herein we revise our estimates for Culp, which reported 1QFY24 results and issued guidance in the face of continued weak demand juxtaposed against improving and better-than-expected margins.Gross margin for CHF, Culp’s mattress fabrics segment, is recovering faster than expected (up ~700 bps in 1QFY24 versus 1QFY23).For CUF, Culp’s upholstery fabrics segment, management grew 1QFY24 gross margin by 667 bps despite a significantly down Y/Y sales comparison (~ -17.4%).

Culp, Inc. - Revising Estimates to Reflect Continued Demand Weakness and Margin Improvement

<ul style="list-style-type: disc;"><li>After Wednesday’s close, Culp Inc. reported a 1Q24 EPS loss of $0.27, beating our $0.36 loss estimate and its 1Q23 $0.47 LPS.</li><li>Revenues missed expectations and residential demand challenged. The balance sheet remains strong.</li><li>The Mattress Fabric (CHF) segment delivered a markedly improved margin, reporting a gross margin of 6.8%, up from negative 0.1% a year ago and better than our estimate of 2.6%.</li></ul>

After Wednesday’s close, Culp Inc. reported a 1Q24 EPS loss of $0.27, beating our $0.36 loss estimate and its 1Q23 $0.47 LPS.Revenues missed expectations and residential demand challenged. The balance sheet remains strong.The Mattress Fabric (CHF) segment delivered a markedly improved margin, reporting a gross margin of 6.8%, up from negative 0.1% a year ago and better than our estimate of 2.6%.

Culp, Inc - Loss Narrows; 1Q Margins Improve as Top Line Remains Pressured

United States

Culp, Inc. manufactures and markets upholstery fabrics and mattress tickings for use in furniture and bedding industries. The Company's fabrics are used in the production of residential and commercial furniture and bedding products, including sofas, recliners, chairs, loveseats, sectionals, sofa-beds, office seating, panel systems, and mattress sets.

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Culp Inc (CULP US)

Culp, Inc. - Introducing Updated Model; FY24 Estimates Unchanged

After inputting data from the Culp 2QFY24 Form 10Q filing, FY24 estimates are unchanged. We moderated FY25 and FY26 revenue and profit expectations.

Water Tower Research

Culp, Inc. - Revising Estimates After 2QFY24 Positive Surprise

The objective of operating profitability by 4Q remains intact and achievable. We expect, and are modeling, positive net income in FY25.

Water Tower Research

Culp, Inc.- Culp Reports Improved 2QFY24

The consolidated revenue comparisons were modestly better than last year and our estimate. Moreover, the consolidated operating income (loss)...

Water Tower Research

Culp, Inc. - Revising Estimates to Reflect Continued Demand Weakness and Margin Improvement

Herein we revise our estimates for Culp, which reported 1QFY24 results and issued guidance in the face of continued weak demand juxtaposed against...

Water Tower Research

Culp, Inc - Loss Narrows; 1Q Margins Improve as Top Line Remains Pressured

The Mattress Fabric (CHF) segment delivered a markedly improved margin, reporting a gross margin of 6.8%, up from negative 0.1% a year ago and...

Water Tower Research

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