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Results: HNI Corporation Exceeded Expectations And The Consensus Lifted This Year's Outlook

Simply Wall St
·4 mins read

As you might know, HNI Corporation (NYSE:HNI) recently reported its second-quarter numbers. HNI beat expectations by 9.9% with revenues of US$417m. It also surprised on the earnings front, with an unexpected statutory profit of US$0.29 per share a nice improvement on the losses that the analysts forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on HNI after the latest results.

See our latest analysis for HNI

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Following the recent earnings report, the consensus from three analysts covering HNI is for revenues of US$1.88b in 2020, implying a considerable 12% decline in sales compared to the last 12 months. Statutory earnings per share are expected to tumble 56% to US$0.84 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$1.92b and earnings per share (EPS) of US$0.55 in 2020. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the very substantial lift in earnings per share expectations following these results.

There's been no major changes to the consensus price target of US$32.50, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic HNI analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$27.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. Over the past five years, revenues have declined around 0.9% annually. Worse, forecasts are essentially predicting the decline to accelerate, with the estimate for a 12% decline in revenue next year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.8% per year. So while a broad number of companies are forecast to decline, unfortunately HNI is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around HNI's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that HNI's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for HNI going out to 2021, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for HNI that we have uncovered.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.