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Raymond James Briefs On Steelcase
6.23.10 | St. Petersburg, FL |
Investment analysis firm Raymond James & Associates
reaffirmed its Strong Buy rating on Steelcase
Inc. and increased its earnings estimates following release
of the company's better-than-expected first quarter FY11 results and
management's conference call.
SCS: F1Q11 $0.01 Adj. EPS and $0.05 Operating Beat; Revenues Turn the Corner
Analyst(s): Budd Bugatch
>After Monday's market close, Steelcase reported a F1Q11 GAAP loss of $0.08. Excluding $2.5 million of pretax restructuring charges ($0.01 per share assuming a 35% tax rate), and an $11.4 million tax charge ($0.09 per share), we peg adjusted EPS at $0.01, compared with our $0.06 loss estimate (also consensus).
>Total sales were $541.8 million (-0.7% year-over-year), above our $528.5 million estimate, the $530 million consensus, and management's guidance of $520 to $540 million. Adjusted for $14 million of dealer de-consolidations and $6 million of favorable currency translation, organic growth was approximately 1%, noteworthy given the previous six consecutive quarters of year-over-year sales declines.
>GAAP results beat our model at the operating income line by $0.05, driven primarily by higher gross margin which increased to 29.8% in F1Q11 compared with our 28.0% estimate and 28.5% in the prior year quarter. Below the operating line, higher tax rate was a $0.09 per share drag (reflecting an $11.4 million charge related to the new healthcare bill), offset partially by higher other income (+$0.03) driven by $4.0 million of variable life company-owned life insurance (COLI) income. Excluding restructuring charges (but including $1.9 million of COLI income from whole life policies), normalized operating income was $1.1 million versus our estimated $8.6 million operating loss, a $0.05 per share beat.
>Drilling down, North American sales declined 0.4% year-over-year to $292.7 million, better than our $281.2 million guess. Adjusted for dealer de-consolidations and currency, organic growth was 2.4%. Normalized segment operating margin was 4.0%, down 80 basis points versus last year but much better than our 0.8% forecast.
>International sales declined 6.9% to $141.6 million, missing our $151.8 million estimate. Excluding restructuring, the International segment operating loss was $9.4 million (-6.6% of sales), below our $6.6 million loss estimate (-4.3% of sales). The company's Other segment revenues were $107.5 million, up 7.9% year-over-year and ahead of our $95.6 million estimate. Other segment normalized operating margin was 4.6% versus our 0.5% estimate. We believe Polyvision has significantly turned around in this segment.
>Reflecting the GAAP net loss and increased working capital, Steelcase used $19.1 million of operating cash during the quarter. The company ended F1Q11 with $139.6 million of cash and short-term investments and $298.7 million of total debt.
>Steelcase guided F2Q11 revenue to the range of $560 to $585 million compared with our $570.5 million estimate and the $576 million consensus. Guidance assumes $14 million of unfavorable currency translation and a $13 million negative impact from dealer de-consolidations, implying organic revenue growth of 2% to 6%. Management expects F2Q11 GAAP EPS of $0.01 to $0.05, including $4 million of pretax restructuring ($0.02 per share after tax). Our current published F2Q11 EPS estimate is $0.01; consensus is $0.03.
>Given the operating beat and solid F2Q11 outlook, we expect shares to react positively in Tuesday's early trading. We will have additional commentary and new estimates following management's 10:00 AM (ET) conference call.
Raymond James Brief 6.22.10
SCS: Increasing Estimates Post-Call; Reaffirm Strong Buy
Analyst(s): Budd Bugatch
>We reaffirm our Strong Buy rating on Steelcase while increasing EPS estimates following the better-than-expected F1Q11 EPS release and management's conference call. Our $10 price target is unchanged and represents 20x our FY12 EPS estimate of $0.50 -- above historic norms due to the depressed nature of current period EPS, but justified by our EVA/FCF-derived estimate of intrinsic worth. We continue to believe Steelcase is at the headwaters of multiple years of revenue growth and margin expansion and are forecasting a meaningful EPS recovery. The company boasts a strong balance sheet and shares appear attractively valued trading at 0.5x EV/sales versus the peer median of 0.9x.
>Steelcase is the global market share leader in the contract office furniture industry, with broad exposure to various product categories (seating, systems, storage, etc.), vertical markets (core office, healthcare, education, and government), and geographies (sales outside North America were ~28% of trailing-12-month revenue). Evidence continues to mount corroborating our view that industry demand has troughed, including generally improving macroeconomic data points (GDP, corporate profits, business confidence, white collar employment), industry statistics (BIFMA orders turned positive year-over-year in March), and upbeat recent commentary from industry participants.
>Steelcase's F1Q11 results were encouraging, with sales and EPS exceeding our estimates and consensus. The company delivered modest (1%) organic growth in F1Q11 (+2.4% in North America and +7.9% in Other; offset by a 6.9% International decline). Management noted that project business drove a significant portion of the sales increase and commented that customer visits increased sequentially, though declined year-over-year due to a tough comp.
>Orders during the quarter increased year-over-year in each of Steelcase's three business segments, including 7% growth in North America and 16% constant currency growth in International orders. The Coalesse Group delivered mid- to high-single-digit order growth.
>By product group, seating was strongest (with low-double-digit order growth) compared with a modest decline for wood (which has since improved) and low-single-digit growth for most other categories. By vertical market, core office grew at a low-double-digit rate boosted by a rebound in Financial Services, followed by growth in Insurance, Federal Government, Healthcare, and Education. State and local government orders remain soft due to budget stress.
>We are increasing our F2Q11 EPS estimate from $0.01 to $0.05. FY11 and FY12 EPS are now $0.25 and $0.50, respectively, up from $0.13 and $0.41.
SCS: F1Q11 $0.01 Adj. EPS and $0.05 Operating Beat; Revenues Turn the Corner
Analyst(s): Budd Bugatch
>After Monday's market close, Steelcase reported a F1Q11 GAAP loss of $0.08. Excluding $2.5 million of pretax restructuring charges ($0.01 per share assuming a 35% tax rate), and an $11.4 million tax charge ($0.09 per share), we peg adjusted EPS at $0.01, compared with our $0.06 loss estimate (also consensus).
>Total sales were $541.8 million (-0.7% year-over-year), above our $528.5 million estimate, the $530 million consensus, and management's guidance of $520 to $540 million. Adjusted for $14 million of dealer de-consolidations and $6 million of favorable currency translation, organic growth was approximately 1%, noteworthy given the previous six consecutive quarters of year-over-year sales declines.
>GAAP results beat our model at the operating income line by $0.05, driven primarily by higher gross margin which increased to 29.8% in F1Q11 compared with our 28.0% estimate and 28.5% in the prior year quarter. Below the operating line, higher tax rate was a $0.09 per share drag (reflecting an $11.4 million charge related to the new healthcare bill), offset partially by higher other income (+$0.03) driven by $4.0 million of variable life company-owned life insurance (COLI) income. Excluding restructuring charges (but including $1.9 million of COLI income from whole life policies), normalized operating income was $1.1 million versus our estimated $8.6 million operating loss, a $0.05 per share beat.
>Drilling down, North American sales declined 0.4% year-over-year to $292.7 million, better than our $281.2 million guess. Adjusted for dealer de-consolidations and currency, organic growth was 2.4%. Normalized segment operating margin was 4.0%, down 80 basis points versus last year but much better than our 0.8% forecast.
>International sales declined 6.9% to $141.6 million, missing our $151.8 million estimate. Excluding restructuring, the International segment operating loss was $9.4 million (-6.6% of sales), below our $6.6 million loss estimate (-4.3% of sales). The company's Other segment revenues were $107.5 million, up 7.9% year-over-year and ahead of our $95.6 million estimate. Other segment normalized operating margin was 4.6% versus our 0.5% estimate. We believe Polyvision has significantly turned around in this segment.
>Reflecting the GAAP net loss and increased working capital, Steelcase used $19.1 million of operating cash during the quarter. The company ended F1Q11 with $139.6 million of cash and short-term investments and $298.7 million of total debt.
>Steelcase guided F2Q11 revenue to the range of $560 to $585 million compared with our $570.5 million estimate and the $576 million consensus. Guidance assumes $14 million of unfavorable currency translation and a $13 million negative impact from dealer de-consolidations, implying organic revenue growth of 2% to 6%. Management expects F2Q11 GAAP EPS of $0.01 to $0.05, including $4 million of pretax restructuring ($0.02 per share after tax). Our current published F2Q11 EPS estimate is $0.01; consensus is $0.03.
>Given the operating beat and solid F2Q11 outlook, we expect shares to react positively in Tuesday's early trading. We will have additional commentary and new estimates following management's 10:00 AM (ET) conference call.
Raymond James Brief 6.22.10
SCS: Increasing Estimates Post-Call; Reaffirm Strong Buy
Analyst(s): Budd Bugatch
>We reaffirm our Strong Buy rating on Steelcase while increasing EPS estimates following the better-than-expected F1Q11 EPS release and management's conference call. Our $10 price target is unchanged and represents 20x our FY12 EPS estimate of $0.50 -- above historic norms due to the depressed nature of current period EPS, but justified by our EVA/FCF-derived estimate of intrinsic worth. We continue to believe Steelcase is at the headwaters of multiple years of revenue growth and margin expansion and are forecasting a meaningful EPS recovery. The company boasts a strong balance sheet and shares appear attractively valued trading at 0.5x EV/sales versus the peer median of 0.9x.
>Steelcase is the global market share leader in the contract office furniture industry, with broad exposure to various product categories (seating, systems, storage, etc.), vertical markets (core office, healthcare, education, and government), and geographies (sales outside North America were ~28% of trailing-12-month revenue). Evidence continues to mount corroborating our view that industry demand has troughed, including generally improving macroeconomic data points (GDP, corporate profits, business confidence, white collar employment), industry statistics (BIFMA orders turned positive year-over-year in March), and upbeat recent commentary from industry participants.
>Steelcase's F1Q11 results were encouraging, with sales and EPS exceeding our estimates and consensus. The company delivered modest (1%) organic growth in F1Q11 (+2.4% in North America and +7.9% in Other; offset by a 6.9% International decline). Management noted that project business drove a significant portion of the sales increase and commented that customer visits increased sequentially, though declined year-over-year due to a tough comp.
>Orders during the quarter increased year-over-year in each of Steelcase's three business segments, including 7% growth in North America and 16% constant currency growth in International orders. The Coalesse Group delivered mid- to high-single-digit order growth.
>By product group, seating was strongest (with low-double-digit order growth) compared with a modest decline for wood (which has since improved) and low-single-digit growth for most other categories. By vertical market, core office grew at a low-double-digit rate boosted by a rebound in Financial Services, followed by growth in Insurance, Federal Government, Healthcare, and Education. State and local government orders remain soft due to budget stress.
>We are increasing our F2Q11 EPS estimate from $0.01 to $0.05. FY11 and FY12 EPS are now $0.25 and $0.50, respectively, up from $0.13 and $0.41.
Comment | Categories: Business/Finance, Mfg. & Distr.
