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The manufacturer appears to be in fine shape heading into the last quarter of the year.
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After missing its own top-line estimates in the first quarter of the fiscal year, office furnishings designer and manufacturer Steelcase (SCS +0.00%) turned in an improved performance in Q2, and in the third quarter, it surprised shareholders by handily exceeding management's previous guidance. Steelcase released fiscal third-quarter 2020 results on Tuesday after the markets closed, and on Wednesday, the company suddenly seems less of a value play, as investors have bid up shares by 18% at midday. As we review Steelcase's impressive results below, note that all comparative numbers are presented against the prior-year quarter.
| Metric | Q3 2020 | Q3 2019 | Change |
|---|---|---|---|
| Revenue | $955.2 million | $901.0 million | 6% |
| Net income | $54.9 million | $37.3 million | 47.2% |
| Diluted earnings per share | $0.46 | $0.31 | 48.4% |
Data source: Steelcase.
Image source: Steelcase.
In Steelcase's earnings release, CEO Jim Keane observed that even after making some adjustments for comparability between the current and prior-year quarters, the company still generated excellent results:
We're proud to deliver another quarter of outstanding results, including a 28% improvement in adjusted earnings and terrific year-over-year increases in operating margins in the Americas and EMEA. Our teams continue to execute against our strategies for growth and profit improvement. We continue to capitalize on the investments we've made in new product development and drive initiatives for improving our cost structure.
Also in the release, CFO Dave Sylvester discussed the progress in the EMEA segment, which is a critical component of Steelcase's business, as it represents a potential growth area and currently accounts for one-fifth of total company revenue:
Our $7 million year-over-year profit improvement in EMEA this quarter is reflective of our teams executing against our strategies as we sustained a high level of revenue while driving improvements in gross margin and operating expenses. Our year-to-date profitability demonstrates our ability to drive continued improvement in our business, despite an overall economic environment that continues to be challenging, and puts us in a great position to achieve our near-term target of being profitable in EMEA for fiscal 2020.
For the final quarter of the year, management advised investors to expect revenue of $905 million-$930 million and diluted EPS of $0.30-$0.34, both of which reflect an additional week in fiscal 2020, unfavorable foreign currency translation impacts, and a difficult comparison against Q4 2019, in which revenue jumped 18%.
For the full year, Steelcase expects revenue of approximately $3.7 billion, representing a 7.5% increase over the $3.44 billion booked in fiscal 2019. The company also revised its full-year diluted EPS range to $1.41-$1.45, up from the target set at the beginning of the year of $1.20-$1.35. Investors endorsed this revision on Wednesday, but they've also recognized all year long that a moderately growing economy is beneficial to this professional environments outfitter: As of this writing, shares have appreciated a cool 50% year to date.