HNI Handily Beats Estimates on WF Sales, Hearth Margins
On May 9, HNI reported better-than-expected results, boosted by unexpected strength in Workplace Furnishings (WF) sales and a strong defense of margins in Residential Building Products (RBP) despite weak Hearth Products sales. 1Q23 GAAP EPS was $0.04 and $0.13 non-GAAP (adjusted) versus consensus of ($0.02) GAAP and ($0.03) non-GAAP (adjusted). Our non-GAAP (adjusted) forecast was ($0.02). Management noted improving results in its WF segment, driven by productivity and cost-cutting... CEO Jeff Lorenger noted that HNI's acquisition of Kimball International is on track to close in early June. Our published estimates are for HNI standalone. We comment below on the potential FY23 accretion... HNI trades at a discount to its five-year average multiples. Its forward EV/EBITDA is now at a 22% discount, while its forward P/E ratio is at a 33% discount. Although the pending Kimball International acquisition poses integration risk, the deal is strategically and culturally sound. A value investor with modest tolerance for uncertainty may find HNI attractive.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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