What happened
Shares of Steelcase (SCS 0.93%) jumped 10% on Friday after the office furniture maker reported quarterly results that came in ahead of expectations. The results marked a reversal after Steelcase posted disappointing numbers three months ago, and they back up management's assertion at the time that the shortfall was only a temporary blip.
So what
After markets closed Thursday, Steelcase reported fiscal second-quarter earnings of $0.50 per share on revenue of $998 million, topping analyst estimates for $0.43 per share in earnings on sales of $980 million. The earnings-per-share number grew 22% year over year, while operating margin was up 70 basis points to 8.5%.
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In a statement, CEO Jim Keane called the report "one of our strongest quarters in the past 20 years" and said momentum is building for this one-time growth stock.
"These results demonstrate the effectiveness of our growth strategies and reflect the efforts of our employees around the world," Keane said. "Our new products are strengthening our portfolio in all geographies, our acquisitions and partnerships are providing additional solutions to our dealers and customers, and the war for talent continues to motivate organizations to invest in workspaces that inspire their people."
The company saw growth in the Americas and Asia Pacific. Its Europe region remains "challenging," though Steelcase still sees potential there.
Steelcase said it expects fiscal third-quarter earnings of between $0.33 and $0.37 per share on revenue of between $920 million and $945 million, providing some potential upside to the current consensus forecast of $0.35 per share on revenue of $940 million.
Now what
In June, Steelcase shares fell more than 11% after the company reported results that fell short of expectations. Keane said at the time that business had improved late in that quarter, and he was optimistic they could make up for the shortfall. These latest results back up that claim.
Keane now says, "We believe there is significant potential to expand our earnings" by improving profitability in Europe and integrating acquisitions.
With the jump Friday, shares of Steelcase are now up 23% for the year. The company is going to need to follow through on that potential to expand earnings if it hopes to see that sort of performance continue.
