What happened
Shares of Steelcase (NYSE: SCS) were soaring today after the office furniture maker delivered strong second-quarter results in its earnings report last night.
The stock was up 24.9% as of 11:18 a.m. ET on the news.
So what
Steelcase has struggled with the remote-work trend that began with the pandemic, but the company was able to top a low bar in the second quarter. Organic sales growth was down 1% in the quarter, up 1% in the Americas but down 8% in the international segment. Overall revenue slipped 1% to $854.6 million, but that topped the analyst consensus of $828.8 million.
Further down the income statement is where Steelcase really impressed the market. Gross margin jumped 430 basis points to 33.2% due to higher pricing and operational improvements. That drove adjusted earnings per share up from $0.21 to $0.31, topping expectations at $0.20.
CEO Sara Armbruster said, "More companies are issuing return-to-office mandates, and we're optimistic that our demand levels will improve as customers seek our help to evolve their workplaces to engage, connect, and work better for their employees."
The company is also cutting costs through restructuring in some international markets, for which it took a $7.9 million charge in the quarter, but it expects that to lead to higher margins in the second half of the year.
Now what
Steelcase finished the quarter with a backlog of $700 million, down 26% from the previous year, which was elevated due to supply chain delays. Due to the lower backlog, it expects revenue of $780 million to $805 million in the third quarter, down 3% to 6% from the quarter a year ago, which was worse than the consensus at $820.7 million.
On the bottom line, the company expects adjusted earnings per share (EPS) of $0.23 to $0.27, up from $0.20 in the quarter a year ago, and ahead of estimates at $0.19.
For the full year, it now expects adjusted EPS of $0.80 to $0.90, up from $0.56 in fiscal 2023, and better than expectations of $0.67.
Based on that forecast, Steelcase trades at a forward P/E of 13, which represents a good value if it can return to top-line growth and continue to drive margin expansion.
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