Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<ul><li>The commercial/contract (office) furniture stocks rallied last week following HNI’s strong 3Q23 earnings report.</li><li>The commercial/contract furniture issues rose more than 12.7%, outperforming the broad indexes, with HNI leading the group.</li><li>HNI’s 3Q report reinforced the sector story. Sales remain challenging. Improved pricing, a focus on costs, and eliminating unprofitable distractions restored margins.</li></ul>

The commercial/contract (office) furniture stocks rallied last week following HNI’s strong 3Q23 earnings report.The commercial/contract furniture issues rose more than 12.7%, outperforming the broad indexes, with HNI leading the group.HNI’s 3Q report reinforced the sector story. Sales remain challenging. Improved pricing, a focus on costs, and eliminating unprofitable distractions restored margins.

Furniture/Furnishings Weekly - Office Furniture Back in Focus After Strong HNI Quarter

<ul><li>Home goods retailers and furniture manufacturers fell in a week of tough earnings news.</li><li>Ethan Allen Interiors (ETD) reported adjusted EPS <span style="font-size: var(--content-font-size);">of $0.63 for 1QFY24, down from $1.11 last year and </span><span style="font-size: var(--content-font-size);">below consensus of $0.72. </span></li><li><span style="font-size: var(--content-font-size);">Positives in the quarter </span><span style="font-size: var(--content-font-size);">included a 70-basis point improvement in gross margin of </span><span style="font-size: var(--content-font-size);">61.1% despite 23% lower sales. </span></li></ul>

Home goods retailers and furniture manufacturers fell in a week of tough earnings news.Ethan Allen Interiors (ETD) reported adjusted EPS of $0.63 for 1QFY24, down from $1.11 last year and below consensus of $0.72. Positives in the quarter included a 70-basis point improvement in gross margin of 61.1% despite 23% lower sales. 

Furniture/Furnishings Weekly -  Earnings Misses Lead Home Furnishings Lower

<ul>
<li>The office furniture group fell 6% last week, breaking a streak of outperformance, as indicators pointed to weakness.</li>
<li>The office furniture group is up ~21% in 2023 and 32% over the past 12 months.</li>
<li>The Architectural Billings Index (ABI), a diffusion index and key leading indicator of non-residential construction activity (9-12 months), fell to 44.8 in September from 48.1 in August (AIA). </li>
</ul>


The office furniture group fell 6% last week, breaking a streak of outperformance, as indicators pointed to weakness.
The office furniture group is up ~21% in 2023 and 32% over the past 12 months.
The Architectural Billings Index (ABI), a diffusion index and key leading indicator of non-residential construction activity (9-12 months), fell to 44.8 in September from 48.1 in August (AIA). 


Furniture/Furnishings Weekly - Weak Signals for Office Furniture

<div><div><div><div><ul style="list-style-type: disc;"><li><p>The Fall Furniture Market in High Point, N.C. brought the industry together last week to do business, celebrate successes, and commiserate.</p></li><li><p>We spent the day Saturday, the official opening day, while buyers and vendors had been there since the prior Tuesday.</p></li><li><p>The sky over High Point was gray and wet. So was the mood.</p></li></ul></div></div></div></div>

The Fall Furniture Market in High Point, N.C. brought the industry together last week to do business, celebrate successes, and commiserate.We spent the day Saturday, the official opening day, while buyers and vendors had been there since the prior Tuesday.The sky over High Point was gray and wet. So was the mood.

Furniture/Furnishings Weekly - Gray Skies over High Point; Cloudy Conditions for Industry

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Nasdaq-100 Stock Index / Technical Analysis

<ul>
<li>In last week's Compass (Feb. 22) we discussed our belief that a pullback has begun, and signs continue to point to more downside ahead on the broad market indexes</li>
<li>There has been four failed attempts to reclaim $190 on the Russell 2000 (IWM) and $297 on the Nasdaq 100 (QQQ) over the last five trading days.</li>
<li>These remain important lines in the sand moving forward. Attractive stocks: TPX, LZB, SNBR, ETD, HOFT, FLXS, KEX, SBLK, CMRE, DAC, EGLE, GNK, ASC, GSL, DSX, SB, NM, EURN, more</li>
</ul>


In last week's Compass (Feb. 22) we discussed our belief that a pullback has begun, and signs continue to point to more downside ahead on the broad market indexes
There has been four failed attempts to reclaim $190 on the Russell 2000 (IWM) and $297 on the Nasdaq 100 (QQQ) over the last five trading days.
These remain important lines in the sand moving forward. Attractive stocks: TPX, LZB, SNBR, ETD, HOFT, FLXS, KEX, SBLK, CMRE, DAC, EGLE, GNK, ASC, GSL, DSX, SB, NM, EURN, more


Signs Point to More Downside Ahead; Breadth Deteriorating; Buys in Home Furnishings and Shippers

United States

Flexsteel Industries, Inc. manufactures and sells wooden and upholstered furniture for the retail, contract, and recreational vehicle (RV) furniture markets. The Company's products are sold to furniture dealers, department stores, and RV manufacturers throughout the United States. Flexsteel also sells its products to several national chains that sell on a private label basis.

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Flexsteel Inds (FLXS US)

Furniture/Furnishings Weekly - Office Furniture Back in Focus After Strong HNI Quarter

HNI’s 3Q report reinforced the sector story. Sales remain challenging. Improved pricing, a focus on costs, and eliminating unprofitable...

Water Tower Research

Furniture/Furnishings Weekly - Earnings Misses Lead Home Furnishings Lower

Home goods retailers and furniture manufacturers fell in a week of tough earnings news. Ethan Allen Interiors (ETD) reported adjusted EPS of $0.63...

Water Tower Research

Furniture/Furnishings Weekly - Weak Signals for Office Furniture

The office furniture group fell 6% last week, breaking a streak of outperformance, as indicators pointed to weakness. The office furniture group is...

Water Tower Research

Furniture/Furnishings Weekly - Gray Skies over High Point; Cloudy Conditions for Industry

The Fall Furniture Market in High Point, N.C. brought the industry together last week to do business, celebrate successes, and commiserate.

Water Tower Research

Signs Point to More Downside Ahead; Breadth Deteriorating; Buys in Home Furnishings and Shippers

Signs continue to point to more downside ahead on the broad market indexes with 4 failed attempts to reclaim $190 on $IWM and $297 on $QQQ over the...

Vermilion Research

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