Why Steelcase stock jumped 15% today

What happened

Shares of the office furniture manufacturer Steel case (NYSE: SCS) rallied sharply in morning trading on September 17, rising to 15% around noon EDT. While the stock gave up a bit of that gain, it was still around 11% higher around 2pm. The increase had very little to do with Steelcase anyway, directly speaking.

So what

The big news that got investors excited for Steelcase actually came from its office furniture counterpart. Herman Miller (NASDAQ: MLHR). At 2 p.m., Herman Miller’s stock was up an astounding 33%. Basically, Steelcase just took the tour, which is the real story here.

Image source: Getty Images.

Steelcase manufactures office furniture. In front of COVID-19[female[feminine, and the huge increase in the number of people working from home, investors have been quite unhappy with anything closely related to offices. In fact, at this point there is no clear timeline for when, or perhaps if, office life will return to pre-pandemic “normal”. Even after today’s big leap, Steelcase stock is still down around 40% so far in 2020.

However, Herman Miller just posted profits and they weren’t as bad as some on Wall Street had predicted. The company’s revenue, which was down around 13% (adjusted for acquisitions and currency fluctuations), exceeded analysts’ forecasts by nearly 20%. Sales of home office products more than offset lower sales of traditional office products. Profits hit $ 1.24 per share, much better than analysts’ expectations of $ 0.26. No wonder investors are pushing Herman Miller shares up. Perhaps Steelcase will also end up coping with the COVID-19 slowdown in better shape than originally feared, as it also has products that can be used in the home.

Now what

Investors were very excited about Herman Miller’s financial results, pushing other office furniture names like Steelcase higher in the news. However, long term investors probably shouldn’t read too much into this price movement just yet. The long-term impact of COVID-19 is still unclear, and so far the short-term blow to Steelcase has been severe – Q1 2021 sales, reported in late June, have fallen 41% and adjusted earnings fell $ 0.15 per share in the first quarter of fiscal 2020 for a loss of $ 0.18. Maybe Steelcase will beat Wall Street’s estimates in its next report as well. But that doesn’t necessarily mean the company is doing well, just better than analysts expected. Considering today’s advancement, it’s probably a safer option to adopt a show-me-me-here attitude right now.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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