Interface (TILE 3.22%) just reported better-than-expected fourth-quarter earnings and gave an upbeat forecast for 2024. Investors are cheering the news, sending shares of the flooring specialist up 11% as of 10:30 a.m. ET Tuesday.
Solid results in difficult times
There have been a lot of headlines this earnings season about the impact of higher interest rates and economic uncertainty on the construction and commercial real estate markets. But some companies appear to be managing the headwinds better than others.
Interface earned $0.41 per share in the fourth quarter, beating Wall Street's $0.31-per-share estimate. Revenue, at $325.1 million, was about $10 million shy of expectations and down 3.1% year over year, but the company was able to keep costs in line and preserve pricing.
Gross profit margin was up 646 basis points from last year to 37.9%. Interface said that the education market remains strong and the corporate office business has provided opportunities to take market share, but retail remains weak.
"We are intently focused on commercial excellence and leveraging our strengths as one global organization," CEO Laurel Hurd said in a statement. "Our sales teams are aligned to our fastest growing markets and are working collaboratively across our brands to accelerate growth and drive value for our shareholders."
Interface forecast 2024 full-year revenue of $1.26 billion to $1.28 billion, implying some potential upside to the $1.26 billion Wall Street consensus estimate.
NASDAQ: TILE
Key Data Points
Is Interface a buy after its strong earnings report?
Following Tuesday's jump, Interface shares are now up 65% over the past 12 months, but the stock still trades below its pre-pandemic price.
The company is not yet in growth mode; even at the high end of its projected range, 2024 revenue would still fall short of the $1.298 billion in sales it recorded in fiscal 2022. But Interface seems to be handling the headwinds in real estate well.
For now, management is focused on things the company can control. Interface generated $142 million in cash from operations in 2023 and repaid $105.3 million in debt. Hurd said that Interface would continue to pay down the $417.2 million in debt it had at the close of the year, which should provide the company with more flexibility as end markets normalize.
This isn't a glamorous business, and there are limits to the upside in flooring. But for those looking for a well-run company with ties to a turnaround in construction and real estate, Interface is an attractive option.
