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

Equity Bottom-Up

<ul><li>HNI delivered excellent 2Q24 earnings despite continuing punk industry demand.</li><li>HNI reported strong 2Q24 results on Thursday, July 25, with adjusted EPS of $0.79, $0.17 better than our expectations and $0.18 ahead of consensus. </li><li>It posted operating margins in Workplace Furnishings (WF) much better than anticipated (11.85% versus our 9.4% estimate and 8.2% in 2Q23). </li></ul>

HNI delivered excellent 2Q24 earnings despite continuing punk industry demand.HNI reported strong 2Q24 results on Thursday, July 25, with adjusted EPS of $0.79, $0.17 better than our expectations and $0.18 ahead of consensus. It posted operating margins in Workplace Furnishings (WF) much better than anticipated (11.85% versus our 9.4% estimate and 8.2% in 2Q23). 

Hni - Revising Our Forward EPS Estimates to Reflect Continued Margin Expansion

Thematic (Sector/Industry)

<ul><li>Residential furniture stocks had a tough week over concerns about demand, though commercial furniture stocks fared better.</li><li>The Water Tower Research Commercial/Contract Furniture Index declined 0.5%, the Residential Manufacturers &amp; Suppliers Index fell 3.2%, and Home Goods Retailers declined 5.7%.</li><li>All three trailed the broader indexes (+0.2 to +0.5%) and the Mass Retailers Index (+1.7%). </li></ul>

Residential furniture stocks had a tough week over concerns about demand, though commercial furniture stocks fared better.The Water Tower Research Commercial/Contract Furniture Index declined 0.5%, the Residential Manufacturers &amp; Suppliers Index fell 3.2%, and Home Goods Retailers declined 5.7%.All three trailed the broader indexes (+0.2 to +0.5%) and the Mass Retailers Index (+1.7%). 

Furniture/Furnishings Weekly - July 1, 2024

<ul><li>The DJ30 closed above 40,000 for the first time ever.</li><li>Our Commercial/Contract Furniture Index (+2.3%) outperformed the broader market indexes (all three up +1.6%) and our Mass Retailers Index (+0.6%) last week.</li><li>Residential Manufacturers &amp; Suppliers (-3.8%) and Home Goods Retailers (-2.8%) trailed.</li></ul>

The DJ30 closed above 40,000 for the first time ever.Our Commercial/Contract Furniture Index (+2.3%) outperformed the broader market indexes (all three up +1.6%) and our Mass Retailers Index (+0.6%) last week.Residential Manufacturers &amp; Suppliers (-3.8%) and Home Goods Retailers (-2.8%) trailed.

Furniture/Furnishings Weekly - May 20, 2024

<ul><li>SCS and LZB both reported strong earnings. Steelcase gained 7.2% for the week after posting strong orders and margins in 1QFY25 with adjusted EPS of $0.16, beating consensus of $0.10 and our estimate of $0.11. LZB surged 12.4% after posting adjusted 4QFY24 EPS of $0.95 versus consensus of $0.70.</li><li>It was a mixed week for the Water Tower Research Furniture/Furnishings indexes.</li><li>The Commercial/Contract Furniture Index was up 3.3% for the week, while the Residential Manufacturers &amp; Suppliers Index was down 1.1% and the Home Goods Retailers Index was down 1.2%. </li></ul>

SCS and LZB both reported strong earnings. Steelcase gained 7.2% for the week after posting strong orders and margins in 1QFY25 with adjusted EPS of $0.16, beating consensus of $0.10 and our estimate of $0.11. LZB surged 12.4% after posting adjusted 4QFY24 EPS of $0.95 versus consensus of $0.70.It was a mixed week for the Water Tower Research Furniture/Furnishings indexes.The Commercial/Contract Furniture Index was up 3.3% for the week, while the Residential Manufacturers &amp; Suppliers Index was down 1.1% and the Home Goods Retailers Index was down 1.2%. 

Furniture/Furnishings Weekly - June 24, 2024

<ul><li>After Monday’s market close, HNI announced an intended plant consolidation in which it will close its Hickory, NC furniture manufacturing plant (HBF is part of its Workplace Furnishings [WF] segment) during 1H25 and transfer production to other North American facilities.</li><li>Management avows that the initiative will improve productivity and strengthen operations but, importantly, will not sacrifice capacity or create disruption to customers who will benefit ultimately from better delivery and logistics coordination.</li><li>During the balance of 2024 and 2025, HNI will book ~$10.3MM in restructuring, accelerated depreciation, and other charges ($1.5MM non-cash). </li></ul>

After Monday’s market close, HNI announced an intended plant consolidation in which it will close its Hickory, NC furniture manufacturing plant (HBF is part of its Workplace Furnishings [WF] segment) during 1H25 and transfer production to other North American facilities.Management avows that the initiative will improve productivity and strengthen operations but, importantly, will not sacrifice capacity or create disruption to customers who will benefit ultimately from better delivery and logistics coordination.During the balance of 2024 and 2025, HNI will book ~$10.3MM in restructuring, accelerated depreciation, and other charges ($1.5MM non-cash). 

HNI Corporation - Announces $10.3MM HBF Restructuring

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 - Revising Our Forward EPS Estimates to Reflect Continued Margin Expansion

HNI reported strong 2Q24 results on Thursday, July 25, with adjusted EPS of $0.79, $0.17 better than our expectations and $0.18 ahead of consensus.

Water Tower Research

Furniture/Furnishings Weekly - July 1, 2024

Residential furniture stocks had a tough week over concerns about demand, though commercial furniture stocks fared better.

Water Tower Research

Furniture/Furnishings Weekly - May 20, 2024

Our Commercial/Contract Furniture Index (+2.3%) outperformed the broader market indexes (all three up +1.6%) and our Mass Retailers Index (+0.6%)...

Water Tower Research

Furniture/Furnishings Weekly - June 24, 2024

SCS and LZB both reported strong earnings. Steelcase gained 7.2% for the week after posting strong orders and margins in 1QFY25 with adjusted EPS...

Water Tower Research

HNI Corporation - Announces $10.3MM HBF Restructuring

During the balance of 2024 and 2025, HNI will book ~$10.3MM in restructuring, accelerated depreciation, and other charges ($1.5MM non-cash).

Water Tower Research

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