3Q23 Margins Beat Expectations
Before market open today, HNI reported 3Q23 adjusted EPS of $0.94, substantially ahead of our estimate of $0.64 and consensus of $0.63. Positive surprises on the gross margin line accounted for the beat. Sales were roughly in line with expectations at $711.7 million versus our $713 million estimate. Our pre-report concerns were answered with strong performance. Revenue in the Legacy Workplace Furnishings segment was roughly in line with the year-ago quarter, confirming for us that demand in office furniture has bottomed and stabilized. Legacy WF sales were $378.8 million, roughly in line with our $380 million estimate, and up ~1% versus the prior year. Adjusted for divested revenue, organic Legacy sales rose 1.8%. Margins in the Residential Building Products (Hearth) segment were stronger than expected. Sales fell 22% Y/Y, but at $174.8 million, about $4.1 million below our estimate. Operating income came in at $30.9 million, a 17.7% operating margin, unchanged from a year ago. Operating income in the WF segment was in the double-digit range, up 7.3% from a year ago, and 2.3% above our estimate. The table below presents the full results comparison. We will revise estimates later today.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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