3QFY24 Earnings: Margins Drive EPS Upside
After Tuesday’s close, Steelcase reported 3QFY24 adjusted EPS of $0.30, ahead of our $0.25 estimate and consensus of $0.23. Revenue came in lighter than expected at $778 million versus our $804 million estimate and consensus of $796 million. Steelcase delivered another quarter of gross margin improvement at 32.4%, up 370 bps versus 3QFY23, and 46 bps above our estimate. Operating expenses were $12.3 million lower, ~70 bps, which was better than we modeled. Both segments showed SG&A efficiencies. Our variance analysis is attached. 3QFY24 results underscore and confirm management’s focus on driving profit through efficiencies, despite a weak sales environment. Orders grew 15% versus last year company-wide, up 16% in the Americas and up 10% in International, compared with a weak 3QFY23. Recognized revenues, slightly below guidance, were hampered by some slower deliveries and, perhaps, by a divested dealer it owned. The story for Steelcase remains its improving margins despite flattish demand. We see discipline in pricing and continued progress on its avowed goal to cut $50 million in costs. The stock, up almost 80% YTD until the report, sold off after hours. The sell-off smells a bit like a knee-jerk reaction to the revenue miss. Investors seem better served by staying focused on margins and order trends. Margin performance has been exemplary, and orders remain steady despite poor office occupancy and sluggish return-to-office. Guidance for 4QFY24 pegged adjusted EPS at a range of $0.19-0.23 on revenue of $765-790 million. Our published estimates are $0.23 and $798 million. We will publish revised estimates after the management conference call, which is scheduled for 8:30 am ET on Wednesday, December 20. We will also be hosting Steelcase at WTR’s first Virtual Furniture/Furnishings Conference on January 17, 2024. Registration link available in our full report.Steelcase provides furniture settings, user-centered technologies and interior architectural products. The company's furniture portfolio includes panel, fence and beam-based furniture systems, storage, fixed and height-adjustable desks, benches and tables and complementary products. The company's seating products include task chairs and seating for specific vertical markets. The company's technology solutions support group collaboration by integrating furniture and technology. The company's interior architectural products include full and partial height walls and architectural pods. The company also provides services, including workplace strategy consulting, data-driven space measurement, and lease origination services.
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