Steelcase Q1 Profit Rises, But Adj. Earnings Miss Estimates; Sees Q2 Below View

(RTTNews) - Office furniture maker Steelcase Inc (SCS) Thursday reported an increase in first-quarter profit on higher sales. However, adjusted earnings and revenues missed analysts' expectations. The company also projected second-quarter earnings and revenues below analysts' estimates. The shares fell about 19 percent in the morning trade.

Jim Keane, president and CEO of the company said, "Earnings were lower than our expectations due to less than expected growth in the Americas and higher costs associated with product warranties, freight and distribution, some of which are expected to continue to impact our results through the second quarter."

For the first quarter ended May 30, the company's net income increased to $21 million or $0.17 per share from $13.2 million or $0.10 per share in the previous year.

Excluding net restructuring benefits, adjusted earnings per share were $0.12, while the firm posted $0.13 per share last year.

On average, four analysts polled by Thomson Reuters expected earnings of $0.16 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter grew 8.4 percent to $723.1 million from $667.1 million a year ago, but came below analysts' estimate of $728.73 million.

Organic revenue growth over the prior year was 8 percent after adjusting for about $4.4 million of favorable currency translation effects.

In the Americas, organic revenue increased 6 percent, while the EMEA segment posted organic revenue growth of 10 percent. The Other category showed organic revenue growth of 14 percent.

Looking ahead to the second quarter, Steelcase expects earnings per share to be in the range of $0.18 to $0.22 per share. Excluding restructuring costs relating to previously announced restructuring projects, adjusted earnings are expected to be in the range of $0.22 to $0.26 per share.

Second-quarter revenues are anticipated to be between $760 million and $785 million, which reflects expected organic revenue growth in the range of 0 to 3 percent over the prior year.

Analysts are looking for earnings of $0.28 per share, on revenues of $794.83 million for the quarter.

The board has declared a cash dividend of $0.105 per share, to shareholders of record on July 7, 2014, payable on July 16.

Further, the company said it has initiated procedures with the applicable works councils regarding a project to exit a manufacturing facility in France and transfer its activities to other existing facilities in the EMEA region to safeguard the company's global competitiveness.

This project may involve the transfer of the operations of the facility to a third party or result in a closure. Total costs of the project are currently estimated at $30 to $50 million, with projected annual savings of roughly $10 million when fully implemented.

SCS is currently trading at $14.33, down 18.86 percent.