Steelcase (NYSE: SCS) reported Q3 EPS of $0.22, in-line with the analyst estimate of $0.22. Revenue for the quarter came in at $772.1 million versus the consensus estimate of $780.73 million.

Outlook

Orders in the Americas declined approximately 6 percent in the third quarter compared to the prior year (which reflected the impact of initial orders from a very large project in the prior year as well as a divestiture in the current quarter), and backlog at the end of the quarter in the Americas was approximately 7 percent lower than the prior year. EMEA orders grew approximately 4 percent compared to the prior year, and backlog in EMEA at the end of the quarter was approximately 4 percent lower than the prior year. Orders in the Other category grew modestly compared to the prior year. Considering these and other factors, the company expects fourth quarter fiscal 2018 revenue to be in the range of $740 to $765 million. Adjusted for an estimated $17 million of favorable currency translation effects, expected revenue from the pending acquisition of AMQ Solutions and the impact of divestitures, the projected revenue range translates to an expected organic decline of 3 to 6 percent. In the fourth quarter of fiscal 2017, the company reported revenue of $769.1 million.

Steelcase expects to report diluted earnings per share between $0.14 to $0.18 for the fourth quarter of fiscal 2018. Steelcase reported diluted earnings per share of $0.21 and adjusted earnings per share of $0.22 in the fourth quarter of fiscal 2017. Prior year results reflected an $8 million reduction of the company's net deferred tax assets due to a change in the French corporate tax rate, which reduced diluted earnings per share by approximately $0.06, net of related variable compensation effects.

"There are three potential items which are not reflected in our earnings estimate for the fourth quarter that we estimate could significantly impact our results," said Dave Sylvester. "Two of these items are related to potential reductions in the U.S. and French statutory tax rates, which those governments are currently considering and if enacted in the fourth quarter could require us to record non-cash charges to reduce the value of our deferred tax assets. In addition, a potential transaction related to an unconsolidated affiliate could result in a pre-tax gain in the fourth quarter. We have not included these items in our earnings estimate as there are a number of factors relating to these items which are outside of our control."

"Throughout this year we have increased spending primarily on product development. The products we plan to launch in Q4 include major additions to our offering which are expected to contribute significantly to our revenue in fiscal 2019," said Jim Keane. "These products, along with our marketing partnerships and pending acquisition, are expected to boost our growth beyond offsetting declines in legacy products and applications. We expect to stay invested in developing new products while continuing to control spending in other areas of the business in order to balance growth with profitability."

GUIDANCE:

Steelcase sees Q4 2018 EPS of $0.14-$0.18, versus the consensus of $0.32. Steelcase sees Q4 2018 revenue of $740-765 million, versus the consensus of $775.63 million.

For earnings history and earnings-related data on Steelcase (SCS) click here.