Shares of office furniture maker Steelcase (NYSE:SCS) rallied strongly in morning trading on Sept. 17, rising as much as 15% by around noon EDT. Although the stock gave back a little bit of that gain, it was still higher by around 11% at roughly 2 p.m. The rise had very little to do with Steelcase, directly speaking, anyway.
The big news that got investors excited about Steelcase actually came out of office furniture peer Herman Miller (NASDAQ:MLHR). At 2 p.m. Herman Miller's stock was higher by an incredible 33%. Basically, Steelcase just went along for the ride, which is the real story here.
Steelcase makes office furniture. In the face of COVID-19, and the huge jump in the number of people working from home, investors have been pretty glum about anything closely related to offices. In fact, at this point there's no clear timeline for when, or perhaps if, office life will get back to a pre-pandemic "normal." Even after the big jump today, Steelcase's stock is still down about 40% so far in 2020.
However, Herman Miller just reported earnings and they were... not nearly as bad as some on Wall Street had been expecting. The company's top line, which was down roughly 13% (adjusted for acquisitions and currency fluctuations), beat analyst projections by nearly 20%. Sales of home office products more than offset the drop in traditional office product sales. Earnings came in at $1.24 per share, way better than analyst expectations of $0.26. No wonder investors bid Herman Miller's stock up. Perhaps Steelcase, too, will end up muddling through the COVID-19 downturn in better shape than originally feared, since it also offers products that can be used at home.
Investors got really excited about Herman Miller's financial results, pushing other office furniture names, like Steelcase, higher on the news. However, long-term investors probably shouldn't read too much into this price move just yet. The longer-term impact of COVID-19 is still unclear, and so far, the near-term hit for Steelcase has been rough -- fiscal first quarter 2021 sales, reported at the end of June, dropped 41% and adjusted earnings fell from $0.15 per share in the first quarter of fiscal 2020 to a loss of $0.18. Maybe Steelcase will beat Wall Street estimates when it reports next, too. But that won't necessarily mean the business is doing well, just better than analysts had been expecting. Given the advance today, it's probably a safer option to take a show-me attitude here right now.