MillerKnoll Delivers Solid Q2 Results but Signals a Softer Outlook, Stock Drops 9%

MillerKnoll (NASDAQ:MLKN) shares surged more than 8% intra-day today despite mixed fiscal third-quarter report and a weaker-than-expected outlook for both the fourth quarter and full year.

The company posted adjusted earnings per share of $0.44, in line with analyst forecasts. However, revenue came in at $876.2 million, falling short of the $918.88 million consensus, despite growing 0.4% year-over-year.

Looking ahead, MillerKnoll offered Q4 guidance below expectations, projecting earnings per share of $0.46 to $0.52 on revenue of $910 million to $950 million. Analysts had anticipated stronger figures. Full-year expectations were also trimmed, with the company now forecasting EPS of $1.81 to $1.87 and revenue between $3.618 billion and $3.658 billion, both underwhelming compared to market estimates.

The company saw mixed performance across its portfolio. While Global Retail orders jumped nearly 15% year-over-year, much of its contract business faced demand softness, largely due to broader economic uncertainty impacting office spending.

MillerKnoll, Inc. (NASDAQ:MLKN), a prominent player in the furniture industry, recently disclosed its financial outcomes for the first quarter of fiscal year 2025, which concluded on August 31, 2024. The company reported earnings per share (EPS) of $0.36, missing the Zacks Consensus Estimate of $0.42. Additionally, MLKN's revenue for the period was $861.5 million, falling short of the anticipated $889.3 million. This performance indicates a challenging start to the fiscal year, with both key financial metrics not meeting analyst expectations.

The reported downturn in MillerKnoll's financial results is attributed to several factors impacting its operations. The ongoing uncertain housing market has notably affected the company's growth prospects across its segments, leading to a decline in adjusted earnings and net sales from the previous year. This situation is further exacerbated by an increase in operating expenses, which has negatively impacted the company's bottom line. Despite these challenges, MillerKnoll remains optimistic about the latter half of fiscal 2025, expecting improvements in the housing market and overall macroeconomic stability.

MillerKnoll's strategy to navigate through these turbulent times includes diversification, international expansion, technological investments, streamlined processes, and innovation. These initiatives are aimed at bolstering the company's near-term prospects and positioning it for future growth. The company's efforts to manage operating expenses in line with sales levels and its focus on enhancing platform operational capabilities are critical components of this strategy. Despite the sluggish housing market affecting the Retail segment, there is a noticeable improvement in demand, especially in the Contract business, indicating a potential turnaround in the company's fortunes.

The financial metrics further illustrate the company's current market position and investor sentiment. With a Price to Earnings (PE) ratio of approximately 26.23, investors seem to have a moderate expectation of the company's future earnings growth. The Price to Sales ratio of about 0.47 and an Enterprise Value (EV) to Sales ratio of approximately 0.92 reflect the market's valuation of the company's sales. Additionally, the EV to Operating Cash Flow ratio of around 14.81 indicates the company's valuation in comparison to its operating cash flow, providing insights into its financial health and operational efficiency.

In conclusion, MillerKnoll's first-quarter fiscal 2025 results highlight the challenges faced by the company in a difficult market environment. However, the company's strategic initiatives and the observed improvement in demand within certain business segments suggest potential for recovery. As MillerKnoll continues to adapt to market conditions and execute its growth strategies, investors and stakeholders will be closely monitoring its progress in the coming months.

MillerKnoll, Inc. (NASDAQ:MLKN) shares were trading more than 7% higher pre-market following the company’s reported Q3 results, with EPS of $0.28 coming in slightly better than the consensus estimate of $0.27. Revenue was $1.03 billion, in-line with the consensus estimate.

Demand trends remained robust with orders growing organically by 20.3% year-over-year, driven by growth across all segments. To little surprise, inflation and supply chain headwinds persisted throughout the quarter, which drove a 640bp year-over-year decline in gross margin. However, management noted that supply chain constraints began to ease during the second half of Q3, and expects pricing actions to continue benefiting margins in the coming quarters.

The company provided its Q4/22 outlook, expecting EPS in the range of $0.46-$0.52, compared to the consensus of $0.49, and revenue in the range of $1.075-1.115 billion, compared to the consensus of $1.03 billion.

Analysts at Berenberg Bank said they continue to take a positive view on the company, as they expect demand to remain strong and macro headwinds to ease.