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Raymond James Downgrades HNI to ‘Market Perform’

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HNI’s price movement

HNI (HNI) has a market cap of $1.8 billion. It fell 24.4% to close at $40.97 per share on September 20, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -23.6%, -23.5%, and 15.9%, respectively, on the same day.

HNI is trading 25.1% below its 20-day moving average, 22.3% below its 50-day moving average, and 3.0% below its 200-day moving average.

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Related ETFs and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.13% of its holdings in HNI. The ETF tracks a market-cap-weighted index of growth companies culled from the S&P 400. The YTD price movement of IVOG was 8.6% on September 20.

The Vanguard Small-Cap ETF (VB) invests 0.08% of its holdings in HNI. The ETF tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%–15% of the investable universe.

The market caps of HNI’s competitors are as follows:

  • Steelcase (SCS): $1.6 billion
  • Herman Miller (MLHR): $1.9 billion
  • Knoll (KNL): $1.1 billion

HNI’s rating

Raymond James has downgraded HNI’s rating to “market perform” from “outperform.”

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Performance of HNI in fiscal 2Q16

HNI reported fiscal 2Q16 net sales of $536.5 million, a fall of 5.6% compared to net sales of $568.2 million in fiscal 2Q15. Net sales for its office furniture and hearth products segments fell 5.0% and 7.8%, respectively, in fiscal 2Q16 compared to fiscal 2Q15.

The company’s gross profit margin and operating income rose 7.3% and 16.8%, respectively, in fiscal 2Q16 compared to the prior year’s period. It reported restructuring expenses of $0.57 million in fiscal 2Q16 compared to -$0.56 million in fiscal 2Q15.

Its net income and EPS (earnings per share) rose to $29.0 million and $0.64, respectively, in fiscal 2Q16 compared to $23.9 million and $0.52, respectively, in fiscal 2Q15.

HNI’s cash and cash equivalents fell 14.4%, and its inventories rose 35.9% in fiscal 2Q16 compared to fiscal 4Q15. Its current ratio fell to 0.99x, and its debt-to-equity ratio rose to 1.68x in fiscal 2Q16 compared to a current ratio and debt-to-equity ratio of 1.01x and 1.65x, respectively, in fiscal 4Q15.

Projections

HNI has made the following projections for fiscal 3Q16:

  • It expects sales to fall 4%–7%, which includes the impact of a lower demand in its office furniture and hearth segments.
  • It expects non-GAAP (generally accepted accounting principles) EPS of $0.74–$0.79.

The company has made the following projections for fiscal 2016:

  • It expects sales to fall 3%–6% compared to the prior year’s period.
  • It expects non-GAAP EPS of $2.50–$2.70.

Next, let’s take a look at GoPro (GPRO).

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