Office furniture specialist Steelcase (NYSE:SCS) reports its fiscal second-quarter 2006 earnings bright and early tomorrow morning. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? Seven analysts now follow Steelcase. The new addition added his vote to the other four buys; two analysts still say you should at best hold this one.
  • Revenues. On average, analysts expect Steelcase to post 11% sales growth to $781.2 million.
  • Earnings. Profits are predicted to rise 38% to $0.18 per share.

What management says:
In its last quarterly earnings release, Steelcase CEO James Hackett pointed to "plenty of evidence that our company's positive momentum is continuing" -- a sentiment later confirmed by Stephen Simpson in his write-up on the quarter. Sales grew modestly at just under 8%, margins expanded, and the firm more than doubled its reported profits per share.

Most interesting of all, though (see below for why), was Hackett's mention that Steelcase "successfully launched the Nurture health care brand." So this isn't just a firm that, as Stephen argues, is in the midst of a successful turnaround -- it's also a firm that's expanding certain lines of business.

What management does:
Meanwhile, the turnaround proceeds apace. Gross margins continue to inch upwards. This, combined with the firm's restrained growth in operating expenses (up 4% year-over-year in the last six months, or slower than the firm's 7% sales growth), has helped to double the firm's slim 2.2% operating margin of one year ago. Rolling net margins likewise continue to improve.

Margins %

2/05

5/05

8/05

11/05

2/06

5/06

Gross

28.8

29.4

29.9

30.4

30.7

30.7

Op.

1.4

2.2

3.0

3.9

4.3

4.4

Net

0.5

0.9

1.2

1.4

1.7

2.1
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Now back to the "Nurture health care brand." Although it didn't seem like it at the time, this apparent throwaway comment in last quarter's earnings release turned out to have been foreshadowing. In a press release earlier this month, Steelcase announced that it has acquired a pair of Canadian health-care furnishings companies: Softcare Innovations and DJRT Manufacturing. Steelcase characterized the purchases as "part of Steelcase's strategy to grow its new health-care division, Nurture by Steelcase," which would benefit from the addition of Softcare's patient room casegoods and health-care seating products. DJRT apparently came with the deal, as it was Softcare's "sister company," but no further details on what it does were provided in the press release. Also missing from the press release: any numbers that might help give context to the purchase, and inform Steelcase investors of just how big a deal this is -- such as Softcare's annual revenues, profits, or employee head count. I'm hoping that when tomorrow's news comes out, Steelcase will rectify this oversight, and deign to inform its owners of just what it is that they now own.

Competitors:

  • Herman Miller (NASDAQ:MLHR)
  • HNI Corp (NYSE:HNI)
  • Kimball (NASDAQ:KBALB)
  • Knoll (NYSE:KNL)

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Fool contributor Rich Smith does not own shares of any company named above. The Fool's disclosure policy is an asset to any cubicle.