Steelcase (NYSE: $SCS), a major office furniture company, released its second quarter fiscal 2025 results on Wednesday after markets closed. The market reacted negatively to the mixed results. Here is a deep dive into the company’s second-quarter results.
Steelcase Posts Mixed Results In Q2
Steelcase (SCS) posted a second-quarter adjusted EPS of $0.39, beating estimates of $0.37 and above last year’s EPS of $0.31. In the past four quarters, the office furniture giant has beaten EPS estimates 100% of the time.
Revenue came in at $855.8 million in the second quarter, missing estimates of $867.43 million but 2% higher than last year’s revenue of $854.6 million. In the past four quarters, Steelcase (SCS) has missed revenue estimates 100% of the time.
Other Financial Highlights
The gross margin rose 130 bps to 34.5%, driven by “favorable business mix and benefits from operational performance and cost reduction initiatives,” according to Steelcase. It reported $205.1 million in operating expenses, a $30.8 million reduction compared to last year.
Steelcase reported total liquidity of $507.1 million, a $192.6 million increase compared to last year. It ended the quarter with $446.7 million in total debt, and trailing twelve-month adjusted EBITDA of $285.3 million, or 9.1% of revenue, a 16% increase compared to last year.
The board announced a cash dividend of $0.10 per share. During the quarter, it bought back $24 million worth of shares.
Steelcase (SCS) Third Quarter Outlook
The company expects organic revenue growth of 1% to 5% in the third quarter to $785 to $810 million compared to the 477.9 reported last year. It expects an adjusted EPS of $0.21 to $0.25 in the third quarter compared to an adjusted EPS of $0.29 reported last year. It forecast a gross margin of 32.5% to 33.0% in Q3 and operating expenses of $225 million to $230 million.
Steelcase (SCS) Market Performance
Steelcase has underperformed the market in 2024, rising 4.4% year to date. However, it is up 61.44% in the past 12 months. Over the past month, the stock is up 7.8% compared to the 1.4% gain of the S&P 500 over the last month.
Wednesday’s closing price of $14.11 is above both the 50 and 200 DMAs of $13.51 and $12.99, respectively. However, following the revenue miss, Steelcase (SCS) was down 9.92% in premarket trading at $12.71 as of 8:31 AM EDT.
Steelcase has been given a moderate buy rating by one analyst, who forecasts a price of $18 for the stock in the next 12 months. The prediction represents a 27.57% upside based on Wednesday’s closing price.
Fed Announces Massive Rate Cut
On Wednesday, after markets closed, the US Federal Reserve announced its first rate cut in over four years. The Fed cut its rate by 0.5% to 4.75% to 5%.
According to Fed Chair Jerome Power, the move was necessary amid rising prices and concerns about the job market. The cut will provide relief for borrowers dealing with some of the highest interest rates in over 20 years.
The cut was larger than most analysts anticipated, and the Fed’s forecasts signal it could issue another 0.5% cut by the end of 2024.
What Does The Future Hold For Steelcase?
One of the most significant developments that could affect Steelcase’s bottom and top lines going forward is the larger-than-forecast Fed rate cut. Lower interests will help to boost liquidity, which could spur companies to spend more on office supplies in anticipation of growth.
With Steelcase stock currently at over 45% below its pre-pandemic high, the expected lowering of borrowing costs could cause the stock price to grow again. As such, it potentially represents a great buying opportunity as part of a long-term investment strategy.
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