On Tuesday, Benchmark, a financial analysis firm, increased its price target for HNI Corp (NYSE:HNI) shares to $54 from $50, while maintaining a Buy rating on the stock. The adjustment follows HNI's first-quarter 2024 earnings report, which exceeded Wall Street's expectations in terms of revenue, EBITDA, and EPS.
HNI Corp, a company specializing in office furniture and hearth products, faced challenges with declining sales in its Workplace Furnishings and Residential Building Products segments, recording year-over-year drops of 2.4% and 17.4%, respectively. Despite these challenges, the company showcased its strongest gross margin performance since the first quarter of 2007, with a notable increase of 320 basis points compared to the previous year.
The analyst from Benchmark highlighted the potential for sales volumes to improve as the year goes on. Additionally, there is still room for margin growth through the company's ongoing initiatives. In response to these factors, Benchmark has revised its EPS estimates for HNI Corp upwards by $0.20, setting them at $3.10 for the current year and $3.40 for the following year.
These revised estimates surpass the company's peak earnings in previous cycles, such as in 2007 and between 2016 and 2019. Despite the strong financial performance, HNI Corp's stock price remains approximately 25% lower than the levels it achieved before reaching peak earnings in past cycles.
Benchmark's analysis suggests that HNI Corp's stock is currently undervalued, considering the company's earnings potential even with the current lower sales volumes. This optimistic outlook on the company's valuation and earnings capacity is the basis for Benchmark's reiterated Buy rating and increased price target.
InvestingPro Insights
Following Benchmark's revised outlook on HNI Corp, InvestingPro data further supports the company's strong financial performance. HNI's revenue growth over the last twelve months as of Q1 2024 stands at an impressive 12.09%, with a particularly strong quarterly revenue growth of 22.73%. This indicates a robust recovery trajectory, aligning with Benchmark's expectations of improved sales volumes. Additionally, with a gross profit margin of 39.62% and an operating income margin of 7.28%, HNI has demonstrated its ability to maintain profitability and efficiency in its operations.
InvestingPro Tips highlight that HNI has not only raised its dividend for 13 consecutive years but has also maintained dividend payments for over half a century. This reflects the company's commitment to shareholder returns and financial stability. Moreover, with analysts predicting profitability for the current year and a large price uptick of 25.89% over the last six months, investor confidence seems to be strengthening. For those looking to delve deeper into HNI's financial health and future prospects, InvestingPro offers additional tips, providing a comprehensive analysis for informed decision-making.
To access these insights and more, consider subscribing to InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With the value HNI has shown through its financial metrics, including a 71.82% return over the last year and a strong dividend yield, InvestingPro can help you understand the full picture and make the most of your investments.
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