Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Steelcase Plunged on Thursday

By Lou Whiteman - Jun 20, 2019 at 5:51PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Order delays led to weaker-than-expected quarterly results.

What happened

Shares of Steelcase (SCS 1.40%) fell more than 11% on Thursday after the office furniture maker reported quarterly results that fell short of expectations. The company said it believes it can make up for the shortfall later in the year, but investors on Thursday were in no mood to hang around and find out.

So what

After markets closed Wednesday, Steelcase reported fiscal first-quarter earnings of $0.15 per share on revenue of $824.30 million, falling short of consensus estimates of $0.18 per share in earnings on sales of $839.07 million. Revenue grew by 9.3% and net income grew by 4.7% year over year, but the company wasn't able to generate the level of growth analysts had hoped for.

An angry investor looks at a falling stock chart on a tablet at his desk.

Image source: Getty Images.

Company CEO Jim Keane, in a statement accompanying the results, attributed the miss to some of the broader macroeconomic trends that are impacting the economy, namely the uncertainty that dominated headlines early in the quarter and the labor shortages that have slowed construction projects.

"We fell just short of our revenue estimates because order growth was weighted toward the second half of the quarter and customers requested delivery dates later than we typically see, in part because of construction labor shortages that caused their projects to be delayed," Keane said. "We ended the quarter with a high backlog and a strong pipeline of customer opportunities which support our outlook for the second quarter."

Reinforcing that projection, Steelcase said it expects to generate full-year 2019 earnings of between $1.20 and $1.35 per share, in line with consensus expectations of $1.29 per share in earnings, and reaffirmed its fiscal 2020 target of 5.5% to 9.5% revenue growth.

Now what

So if Steelcase is so confident that the issues plaguing the quarter are temporary, why did investors run for the exits on Thursday? It could be the uncertainty that comes with problems that are beyond management's ability to control, which tends to spook investors.

Following the miss, Steelcase has become more of a "show-me" story. It's up to management in three months' time to show that this miss was not the beginning of a troubling longer-term trend.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Steelcase Inc. Stock Quote
Steelcase Inc.
$12.34 (1.40%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.