Zacks Equity Research
·4-min read
Have you been paying attention to shares of HNI (HNI)? Shares have been on the move with the stock up 9.7% over the past month. The stock hit a new 52-week high of $48.3 in the previous session. HNI has gained 13.7% since the start of the year compared to the 8.4% move for the Zacks Business Services sector and the 7.2% return for the Zacks Business - Office Products industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 29, 2024, HNI reported EPS of $0.37 versus consensus estimate of $0.18 while it beat the consensus revenue estimate by 2.19%.
For the current fiscal year, HNI is expected to post earnings of $3.10 per share on $2.65 billion in revenues. This represents a 16.98% change in EPS on an 8.92% change in revenues. For the next fiscal year, the company is expected to earn $3.62 per share on $2.75 billion in revenues. This represents a year-over-year change of 16.77% and 3.87%, respectively.
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Valuation Metrics
HNI may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
HNI has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 15.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 13.5X. On a trailing cash flow basis, the stock currently trades at 10.3X versus its peer group's average of 5.4X. Additionally, the stock has a PEG ratio of 1.28. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, HNI currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if HNI fits the bill. Thus, it seems as though HNI shares could still be poised for more gains ahead.
How Does HNI Stack Up to the Competition?
Shares of HNI have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Steelcase Inc. (SCS). SCS has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of C, and a Momentum Score of B.
Earnings were strong last quarter. Steelcase Inc. beat our consensus estimate by 60%, and for the current fiscal year, SCS is expected to post earnings of $1 per share on revenue of $3.26 billion.
Shares of Steelcase Inc. have gained 8.7% over the past month, and currently trade at a forward P/E of 13.48X and a P/CF of 7.92X.
The Business - Office Products industry is in the top 1% of all the industries we have in our universe, so it looks like there are some nice tailwinds for HNI and SCS, even beyond their own solid fundamental situation.
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HNI Corporation (HNI) : Free Stock Analysis Report
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