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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.

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Equity Bottom-Up

<ul><li>HNI reported strong 4Q24 margins despite continued revenue headwinds in both Workplace Furnishings (WF) and Residential Building Products (RBP), with adjusted EPS of $0.87 beating our estimate of $0.78 and consensus even as revenue came in lighter than our expectations in both segments.</li><li>See (1) for our summary of the quarter and our variance analysis below.</li><li>EPS should continue to grow through FY26, even on flat revenue, on the basis of (1) continued margin strength, and (2) KII and Mexico synergies delivering $0.70-0.80 EPS growth over the next two years.</li></ul>

HNI reported strong 4Q24 margins despite continued revenue headwinds in both Workplace Furnishings (WF) and Residential Building Products (RBP), with adjusted EPS of $0.87 beating our estimate of $0.78 and consensus even as revenue came in lighter than our expectations in both segments.See (1) for our summary of the quarter and our variance analysis below.EPS should continue to grow through FY26, even on flat revenue, on the basis of (1) continued margin strength, and (2) KII and Mexico synergies delivering $0.70-0.80 EPS growth over the next two years.

HNI Corporation - New Revenue, EPS Estimates...

Thematic (Sector/Industry)

<div><ul><li>We spoke with CEO Iv Culp from Culp, Inc. (CULP) and Tiffany Hinkle, AVP IR with Haverty Furniture (HVT), two companies with excellent insight into the US home furnishings market.</li><li>The home furnishings sector is exhibiting cautious optimism after three to four years of defensive positioning.</li><li>Following pandemic-driven demand spikes and subsequent pull-forward effects, companies experienced an unusually severe downcycle requiring extensive cost restructuring.</li></ul></div>

We spoke with CEO Iv Culp from Culp, Inc. (CULP) and Tiffany Hinkle, AVP IR with Haverty Furniture (HVT), two companies with excellent insight into the US home furnishings market.The home furnishings sector is exhibiting cautious optimism after three to four years of defensive positioning.Following pandemic-driven demand spikes and subsequent pull-forward effects, companies experienced an unusually severe downcycle requiring extensive cost restructuring.

Beyond Tariffs - How Leading Furniture Companies Are Positioning for the Next Upcycle

<ul><li>In a quarter where there are lot of moving pieces, it’s important to keep our eye on the big picture.</li><li>HNI margins should continue to be strong, and the company is well positioned for growth as demand rebounds.</li><li>There are several stories playing out in the current quarter, so let’s tackle each in turn. </li></ul>

In a quarter where there are lot of moving pieces, it’s important to keep our eye on the big picture.HNI margins should continue to be strong, and the company is well positioned for growth as demand rebounds.There are several stories playing out in the current quarter, so let’s tackle each in turn. 

HNI: Revising Estimates; Continued Margin Strength, Restructuring

<ul><li>HNI beat on EPS, posting 3QFY24 adjusted EPS of $1.03, $0.04 above our estimate and $0.10 better than 3QFY23, despite total revenue coming in $41.3 million lower than our estimate and -5.5% Y/Y, showcasing (once again) the company’s strong margins and operating discipline.</li><li>This is a company firing on all cylinders when it comes to margins.</li><li>Given the continued challenging macro/industry conditions confronting both segments (Workplace Furnishings [WF] and Residential Building Products [RBP]), the revenue shortfalls are not particularly unexpected.</li></ul>

HNI beat on EPS, posting 3QFY24 adjusted EPS of $1.03, $0.04 above our estimate and $0.10 better than 3QFY23, despite total revenue coming in $41.3 million lower than our estimate and -5.5% Y/Y, showcasing (once again) the company’s strong margins and operating discipline.This is a company firing on all cylinders when it comes to margins.Given the continued challenging macro/industry conditions confronting both segments (Workplace Furnishings [WF] and Residential Building Products [RBP]), the revenue shortfalls are not particularly unexpected.

HNI Corporation - 3QFY24 Adjusted EPS $1.03 Beats WTR Estimate...

<ul><li>Stocks had a tough week on growth concerns, worries that Fed rate cuts might be more gradual than previously anticipated.</li><li>The Water Tower Residential Manufacturers &amp; Suppliers Index (-3.9%) and Home Goods Retailers Index (-3.7%) outperformed the Commercial/Contract Furniture Index (-6.7%) and all three major indexes (-4.2% to -5.5%).</li><li>The Mass Retailers Index had the week’s best performance (-2.9%).</li></ul>

Stocks had a tough week on growth concerns, worries that Fed rate cuts might be more gradual than previously anticipated.The Water Tower Residential Manufacturers &amp; Suppliers Index (-3.9%) and Home Goods Retailers Index (-3.7%) outperformed the Commercial/Contract Furniture Index (-6.7%) and all three major indexes (-4.2% to -5.5%).The Mass Retailers Index had the week’s best performance (-2.9%).

Furniture/Furnishings Weekly - Industry Conditions Remain Challenged

United States

HNI Corporation manufactures and markets office furniture as well as hearth products. The Company's products are sold primarily through dealers, wholesalers, and retail superstores. HNI has operations in the United States and Canada.

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HNI Corp (HNI US)

HNI Corporation - New Revenue, EPS Estimates...

HNI reported strong 4Q24 margins despite continued revenue headwinds in both Workplace Furnishings (WF) and Residential Building Products (RBP)

Water Tower Research

Beyond Tariffs - How Leading Furniture Companies Are Positioning for the Next Upcycle

We spoke with CEO Iv Culp from Culp, Inc. (CULP) and Tiffany Hinkle, AVP IR with Haverty Furniture (HVT), two companies with excellent insight into...

Water Tower Research

HNI: Revising Estimates; Continued Margin Strength, Restructuring

In a quarter where there are lot of moving pieces, it’s important to keep our eye on the big picture. HNI margins should continue to be strong, and...

Water Tower Research

HNI Corporation - 3QFY24 Adjusted EPS $1.03 Beats WTR Estimate...

HNI beat on EPS, posting 3QFY24 adjusted EPS of $1.03, $0.04 above our estimate and $0.10 better than 3QFY23, despite total revenue coming in $41.3...

Water Tower Research

Furniture/Furnishings Weekly - Industry Conditions Remain Challenged

Stocks had a tough week on growth concerns, worries that Fed rate cuts might be more gradual than previously anticipated.

Water Tower Research

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