Raising Estimates following Strong 3Q Earnings Report
We are raising our non-GAAP (adjusted) EPS estimates for 4Q23 and 2024 following HNI’s strong 3Q23 earnings report on Tuesday, October 31, 2023. Our sales estimates have moderated. Following the 3Q23 report, margins should be sustainably stronger. HNI reported 3Q23 adjusted EPS of $0.93, $0.30 better than consensus. Sales were roughly in line. Margins in both segments, Residential Building Products (RBP) and Workplace Furnishings (WF), beat our expectations and likely consensus. Conference call insights convince us that the margin improvement is sustainable. Pricing in WF is holding and offsetting years of incurred cost inflation. Input costs have stabilized and, in some instances, moderated. HNI’s 2022 company-wide cost-cutting program achieved its goal and is expanding. The shift of production to Mexico is just ramping up and promises future efficiencies. WF sales outlook seems to have stabilized, as we hoped. Sales to small and medium businesses (SMBs) in second and third tier markets are expanding. Orders were up ~6% in 3Q. Contract furniture sales to large customers in major markets are soft. The office transformation in those markets to a hybrid environment is still ramping up. A challenged top-line outlook for RBP (Hearth) persists. A significant portion of RBP sales is tightly tied to housing turnover and new home construction. The outlook for existing home turnover is poor. New home construction is stronger, but historically a smaller market than remodels for RBP. Nonetheless, HNI reported a sequential improvement in orders, yet still down in the high teens Y/Y. HNI completed the exit of non-core, unprofitable businesses with the sale of Poppin, which was acquired with Kimball International. Lamex, an Asian business, was divested last year. The e-commerce business has been streamlined to channels that are profitable.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.
Water Tower Research is built on the foundation of democratizing information flow. We bridge the growing information gap between companies and investors through our investor engagement strategies and open-access research platform.
Our research analysts are Wall Street veterans with the experience and knowledge to work with companies and investors in tandem. We provide access to the information and content that anchors the due diligence process for both professional money managers and individual investors. We leverage traditional research distribution channels and the best of modern digital strategies and tactics to amplify this information flow globally to engage all categories of investors and stakeholders.
Information flow is the foundation for creating investor awareness, knowledge, and engagement. Our mission is to help companies and investors have the tools they need and achieve their goals.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.