2Q Earnings: Workplace Furnishings Powers Adj. EPS Beat; KII Acquisition Shows Accretion Potential
Before market open on August 8, HNI reported 2QFY23 adjusted EPS of $0.55, a strong beat against consensus of $0.21 and our low estimate of $0.16. GAAP earnings, including more than $40 million in charges, of which ~$38 million was acquisition related, were ($0.30). Relative to our estimate, the legacy HNI Workplace Furnishings business, which accounted for about $0.45 of the beat, partially offset lower earnings in the Residential Home Products ~($0.07) and higher corporate expense ~($0.06). The acquisition of Kimball International contributed about $0.07 to adjusted earnings. Better margins powered the WF profits. The legacy business delivered slightly better-than-expected sales, but still lower Y/Y by 12%. The adjusted operating margin improved 5.5% Y/Y and beat our estimate by 7%. Stronger pricing offset input inflation, aided by savings in core SG&A and productivity. Management commented that the profit improvement in WF is ahead of schedule. HNI’s acquisition of Kimball International (KII) closed June 1. The acquisition contributed $56 million in sales for the abbreviated period, and $3.9 million in adjusted operating profit. HNI announced it will divest Poppin, an online office furniture retailer that contributed a $1.1 million adjusted operating loss...HNI provides office furniture and hearth products. The company's Office Furniture segment designs, manufactures, and markets a range of workplace furnishings. The company's portfolio includes panel-based and freestanding furniture systems and complementary products such as seating, storage, tables, and architectural products. The company provides office panel system products, benching, freestanding tables, storage, and social collaborative products. The company's Hearth Products segment manufactures and markets prefabricated fireplaces, hearth stoves, and related products. The company's line of hearth products includes a range of gas, wood, electric, and pellet fueled fireplaces, inserts, stoves, facings, and accessories.
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