Raising Full-Year Estimate
Following a strong 4Q23 report and solid guidance, we are raising our full-year estimate and adjusting the interim periods. 4Q margins were strong, notably in the Residential Building Products (RBP) segment. Workplace Furnishings (WF) margins also improved, with improvement still ahead through pricing, productivity, and KII integration savings. Hearth orders in the RBP segment have been stronger in the new construction channel. Management expects mid-single-digit growth in 2024 and remodel/retrofit to be flat. WF Legacy 4Q sales fell 2.3%, but orders turned positive in December and remain positive into 2024. HNI paid down $162 million in debt in the second half of 2023, reducing the Debt/EBITDA leverage ratio to below 2. We are optimistic that HNI will be in a position to reinitiate meaningful share buybacks in 2024. Our full-year 2024 EPS estimate is now $2.90, up from $2.72. The quarterly sequence reflects a more normal seasonal pattern, weighted to the second half. We were encouraged to hear that WF orders were positive in 4Q, boosted by a strong December after a soft October and November. That December order trend continued into 1Q24. Management noted that some larger orders were for 2Q delivery, pushing out revenue recognition, but adding conviction in the office furniture recovery.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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