Earnings estimates have been rising for Herman Miller (MLHR) after the company delivered strong fiscal 2016 first quarter results.
Not only did sales and earnings beat expectations, management provided Q2 EPS guidance above consensus.
It is a Zacks Rank #1 (Strong Buy) stock.
The valuation picture for Herman Miller stock looks very reasonable too with shares trading at just 13x 12-month forward earnings.
Herman Miller designs and manufactures interior furnishings such as seating, freestanding furniture, storage, casegood and textile products, which are used in various environments including office, healthcare, educational, and residential settings.
The company also acquired Design Within Reach in July 2014.
Strong First Quarter Results
Herman Miller delivered strong fiscal 2016 first quarter results on September 16. Earnings per share came in at 56 cents per share, beating the Zacks Consensus Estimate of 47 cents per share. It was a 19% increase over the same quarter last year.
Net sales rose 11% to $565.4 million, also ahead of the consensus of $555.0 billion. Excluding acquisitions and foreign currency translation, sales increased 8% year-over-year.
Its North American Furniture Solutions segment, which accounted for approximately 60% of net sales, delivered organic sales growth of 7%.
The company also delivered meaningful profit margin expansion. Gross profit as a percentage of net sales expanded 190 basis points to 38.3%. And its operating margin expanded to its highest level in more than six years at 9.7%.
Following strong Q1 results, management provided Q2 EPS guidance above consensus at the time. This prompted analysts to revise their estimates significantly higher for both 2016 and 2017, sending the stock to a Zacks Rank #1 (Strong Buy).
The 2016 consensus estimate is now $2.04, up from $1.89 before the report. The 2017 consensus has increased from $2.19 to $2.29 over the same period. Based on current estimates, analysts are projecting 12% EPS growth both for this year and next year.
The valuation picture looks very reasonable for Herman Miller stock, too. Shares trade at 13x 12-month forward earnings, a discount to its 10-year median of 15x. Its enterprise value to EBIT ratio of 10 is also a discount to its historical multiple of 12.
The Bottom Line
With solid sales growth, expanding profit margins, rising estimates and reasonable valuation, Herman Miller offers investors a lot to like.
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