Steelcase (NYSE: SCS) reported Q1 EPS of $0.14, in-line with the analyst estimate of $0.14. Revenue for the quarter came in at $754 million versus the consensus estimate of $754.17 million.

• Strong order growth of 6 percent in the Americas and 7 percent in EMEA
• EMEA posts significant improvement in operating results
• Growth potential strengthened through additional partnerships and pending acquisition of Smith System
• Best overall showroom and significant new product recognitions at NeoCon
• Outlook for the second quarter projects strong organic revenue growth

"Our momentum continued to build as our new products, partnerships, and updated showrooms helped our order rates grow faster than the market during recent months," said Jim Keane, president and CEO. "We further strengthened our growth potential by launching a number of innovative products which received awards at NeoCon, expanding our offerings through additional partnerships and signing an agreement for the acquisition of Smith System. I'm also proud of the improvement in EMEA as our initiatives to grow the top line and improve profitability are showing results."

"In response to quickly rising steel prices and other commodity costs, we implemented an additional list price adjustment earlier this month, which represented our second increase in four months," said Dave Sylvester, senior vice president and CFO. "We expect commodity cost increases to continue pressuring our gross margin for another quarter or two while these price adjustments take fuller effect. In addition, our revenue in the Americas over the same period is expected to include a growing mix of project business, including projects won at earlier price levels, which will impact our year-over-year gross margin comparisons."

Outlook

Orders in the Americas grew 6 percent in the first quarter and backlog at the end of the quarter was approximately 14 percent higher than the prior year. EMEA orders grew 7 percent and backlog at the end of the quarter was approximately 15 percent higher than the prior year. Orders in the Other category declined 6 percent compared to a strong prior year. The company anticipates completing the acquisition of Smith System Manufacturing Company at the end of June and consolidating its results thereafter. Considering these and other factors, the company expects second quarter fiscal 2019 revenue to be in the range of $865 to $890 million, which includes revenue from the anticipated acquisition. Adjusted for an estimated $4 million of favorable currency translation effects, and the impact of acquisitions and divestitures, the projected revenue range translates to expected organic growth of 6 to 9 percent. In the second quarter of fiscal 2018, the company reported revenue of $775.6 million.

Steelcase expects to report diluted earnings per share between $0.28 to $0.33 for the second quarter of fiscal 2019. The estimates include a net gain from the sale of property in the Americas, which is expected to increase diluted earnings by approximately $0.03 per share after consideration of the related variable compensation expense. Earnings accretion from the anticipated acquisition of Smith System is expected to be modest, due to the initial effects of purchase accounting which will significantly impact operating income. In addition, many of the same factors which negatively impacted the year-over-year comparisons of gross margin in the Americas and Asia Pacific in the first quarter of fiscal 2019 are expected to also impact second quarter gross margin comparisons. Steelcase reported diluted earnings per share of $0.31 in the second quarter of fiscal 2018. Prior year results included a gain from the sale of real estate in EMEA and a discrete tax benefit, which had the effect of increasing diluted earnings by approximately $0.05 per share after consideration of the related variable compensation expense.

"We were honored our showroom was recognized as 'Best in Competition' at NeoCon, representing an endorsement of our design direction by the office interiors community," said Jim Keane. "With our expanding offerings, we are more fully meeting the needs of our customers and winning business from our competition and the pending acquisition of Smith System provides us the opportunity to grow market share in education and learning environments."

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