NEW YORK (AP) -- Shares of HNI Corp. tumbled Tuesday, after the furniture and fireplace maker slashed its third-quarter profit and sales predictions, blaming softer-than-expected demand for office furniture.
THE SPARK: The Muscatine, Iowa-based company said late Monday that it now expects to post adjusted third-quarter net income similar to the earnings of 55 cents per share in the third quarter of 2011. The company had previously projected an adjusted profit of 65 to 70 cents per share.
HNI also cut its sales growth projection to a year-over-year increase of 7 to 10 percent. It previously expected growth of 11 to 14 percent. Based on the company's year-ago revenue of $504.1 million, the new guidance projects $539.5 million to $554.6 million in sales for the current quarter.
Analysts, on average, expected a profit of 64 cents per share on $562.3 million in sales, according to a FactSet poll.
THE BIG PICTURE: HNI is one of the largest office furniture manufacturers in the world and also a major manufacturer of gas and wood-burning fireplaces.
The company said Tuesday that order patterns in both its supplies-driven and contract businesses have recently slowed because of ongoing tough economic conditions. It also said that extreme summer heat made operations less efficient during its peak demand season for office furniture.
HNI plans to release its third-quarter results after the market closes on Oct. 17.
THE ANALYSIS: Raymond James analyst Budd Bugatch backed his "Outperform" rating, but cut his price target for HNI by $2 to $30, citing the reduced guidance.
"Despite some near-term bumpiness, we continue to expect office furniture industry demand to improve against easier comparisons later this year and into 2013 (assuming no major change to the pace of broader economic recovery)," Bugatch wrote in a note to investors.
He added that the rebound in home construction should also give the company's fireplace business a boost for at least the next few years, but acknowledged that the guidance cut will probably keep the company's shares from rising much any time soon.
THE SHARES: Down $4.47, or 14.6 percent, to $26.22 in heavy morning trading. Over the past 52 weeks, the stock has traded between $16.89 and $32.02.