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Earnings preview: Herman Miller to benefit from growing demand in Q3

The market is quite upbeat about the third-quarter financial performance of Herman Miller (MLHR), which is slated to announce the results Wednesday after the closing bell. This time, analysts will be looking for a bigger earnings growth than in the previous quarters, and the consensus estimate indicates a 22% year-on-year increase to $0.61 per share.

Considering the positive surprises in the trailing four quarters, an earnings beat is very much in the cards. Revenues are forecast to move up 8% to $623.35 million. The furniture manufacturer continues to benefit from the recent spurt in the demand for residential and office furniture.

Considering the positive surprises in the trailing four quarters, an earnings beat is very much in the cards

Analysts have given the company’s stock a buy rating, with a price target of $40. Being on a recovery path, with a price that is still below the long-term average, the stock is an investment option worth considering. Also, lower debt and a reasonably good return on equity make it appealing.

Also see: Herman Miller Q2 2019 Earnings Conference Call Transcript

Meanwhile, it needs to be seen as to what extent the management will be able to take forward the expansion activities without external funding. Also, the deceleration in earnings growth over the years could be a dampener as far as investor sentiment is concerned.  Last year, Herman Miller’s profit gained at a pace that is slower than its five-year average growth rate, indicating that the slowdown might continue in the coming quarters.

For the second quarter, the Zeeland, Michigan-based company reported record sales of $653 million, up 8%, supported by a 10% organic order growth. Consequently, adjusted earnings surged 32% annually to $0.75 per share.

Herman Miller shares have maintained a steady uptrend after slipping to an eight-month low towards the end of last year. The stock gained about 18% since the beginning of the year and moved up 17% in the past twelve months.

 

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Earnings: Del Taco Q4 revenue up 7.3%; stock falls on earnings miss

Fast food chain Del Taco Restaurants (TACO) reported higher earnings and revenues for the fourth quarter of fiscal 2018. Earnings missed the Wall Street forecast by a cent, while the top-line matched. The company’s stock dropped sharply during the extended trading session Monday.

Revenues of the California-based Mexican-American quick service restaurant climbed 7.3% annually to $157.3 million, which was broadly in line with the estimates. Comparable restaurant sales rose 1.9%, marking the 21st increase in a row, with strong contributions from both company-owned restaurants and franchises.

Adjusted profit rose to $7 million or $0.18 per share in the December quarter from $6.2 million or $0.16 per share in the prior-year period. Meanwhile, reported earnings dropped sharply to $0.15 per share from $0.89 per share in the fourth quarter of 2017.

Comparable restaurant sales rose 1.9%, with strong contributions from both company-owned restaurants and franchises

“As we move into 2019, we remain focused on our mission to be the leader in the value-oriented QSR+ segment. Our transaction driving initiatives are well underway as we enter 2019, led by our digital transformation including the new Del App which has now eclipsed 400,000 registered users and our expansion of Grubhub delivery to all company-operated restaurants,” said CEO John Cappasola.

Earlier this year, the company initiated optimization of its restaurant network through re-franchising. The initiative is expected to shift the current rate of 55% company ownership to about 45% by next year. During the three-month period, the management repurchased 765,209 shares for $11.05 per share and 20,596 warrants for $1.93 per unit.

For the whole of 2019, Del Taco anticipates generating revenues of $517-$527 million and restaurant contribution margin between 18.1% and 18.6%. Full-year earnings, on an adjusted basis, are expected to come in the range of $0.47 per share to $0.52 per share.

Related: Yum! Brands Q4 2018 Earnings Conference Call Transcript

The management is also looking for net capital expenditures of $42-$47 million. The outlook includes the acquisition of three high-volume restaurants and re-franchise of thirteen lower-volume restaurants, which were closed early this year.

Del Taco shares are currently trading close to the levels seen a year earlier. Having gained about 2% since the beginning of the year, the stock closed Monday’s regular session sharply higher but dropped in the after-hours session.

 

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

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