HNI Corp. (HNI) Tops Q4 EPS by 6c, Revenues Miss
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HNI Corp. (NYSE: HNI) reported Q4 EPS of $0.66, $0.06 better than the analyst estimate of $0.60. Revenue for the quarter came in at $562.1 million versus the consensus estimate of $572.83 million.
Fourth Quarter Highlights
- Double-digit revenue and profit growth in Residential Building Products. Fourth quarter segment revenue increased 15.9 percent organically year-over-year, while operating profit was 11.4 percent higher than the year-ago period.
- Solid profitability in Workplace Furnishings. Fourth quarter segment operating profit exceeded $11 million, despite an 18.6 percent year-over-year top line contraction.
- Strong cash flow generation. Fourth quarter operating cash flow totaled $71 million, and full year operating cash flow was $214 million. Full year operating cash flow was only slightly below the $219 million generated in fiscal year 2019 despite year-over-year total revenue and non-GAAP operating profit declines of 13 percent and 30 percent, respectively.
- High quality balance sheet. Debt at the end of the fourth quarter totaled $175 million— unchanged from last quarter and prior-year levels. The Corporation’s gross leverage ratio remained low at 1.0x. Additionally, the Corporation ended the quarter with $116 million of cash, an increase of $7 million from the end of the third quarter and a $64 million increase from the end of fiscal year 2019. The quarter-ending balance sheet reflects the impacts of the acquisition of Design Public Group at the end of fiscal year 2020.
“Our members finished a challenging year by delivering another solid quarter. Our performance has enabled us to invest more aggressively to improve our competitive position. The acquisition of Design Public Group is a great example of these efforts, as it accelerates our initiatives around eCommerce while providing access to a broader customer group,” stated Jeff Lorenger, Chairman, President, and Chief Executive Officer.
“In 2020, our members adapted, stayed agile, and kept HNI strong in the face of challenging conditions. I am extremely proud of and grateful for the efforts of all HNI members. I have no doubt we are a stronger company because of what we experienced and how we performed this past year.
As we look toward 2021, we see strengthening growth and momentum in our Residential Building Products segment. Activity in both new construction and remodeling are rising and continue to be supported by demographics, deurbanization, nesting trends, and low housing inventories.
In Workplace Furnishings, we are optimistic our environments will improve as we progress through the year and continue to see some signs of initial recovery. The vaccine roll-out, associated return-to-the-office programs, and our ability to capture work-from-home demand support revenue and profit growth as we move through 2021. However, the precise timing and rate of improvement remain uncertain.
In the first quarter of 2021, we expect the conditions we experienced last quarter to generally continue,” Mr. Lorenger concluded.
First Quarter Outlook
- Residential Building Products revenue: Cyclical strength, secular support, company-specific initiatives, and a strong competitive position will continue to drive revenue growth in this segment. Recent trends point to first quarter year-over-year total segment revenue growth rates in the mid-20 percent range.
- Workplace Furnishings revenue: Pandemic-related uncertainty remains and limits the Corporation’s visibility. However, recent order trends point to continued moderation in year-over-year revenue declines driven by small to mid-sized customers and public sector activity. Assuming recent trends continue, first quarter segment revenue, including acquisition impacts, would decline at a year-over-year rate in the high-single digits to low-teens.
- Profitability drivers: The Corporation expects lower first quarter profit margins compared to the prior year due to reduced Workplace Furnishings volume, rising input costs, and higher investment levels. However, first quarter earnings are expected to be positive and will benefit from continued year-over-year improvement in Residential Building Products volume, net productivity benefits, and SG&A cost management.
- Balance sheet and cash flow: The Corporation expects to maintain a strong balance sheet throughout 2021 with leverage ratios in-line with those seen in recent quarters. Low leverage and continued free cash flow generation will provide ample capacity for continued investment, dividend payments, and opportunistic M&A and share buyback activity.
For earnings history and earnings-related data on HNI Corp. (HNI) click here.
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