Steelcase Inc. (NYSE:SCS) shares surged 13% yesterday after the company reported better than expected fourth quarter earnings and issued positive outlook for the current year. The stock rose another 2.40% today in the early trading session to $16.67. After solid earnings, the office furniture maker got a big boost when Raymond James analysts Budd Bugatch and Bobby Griffin upgraded the stock to Strong Buy and raised the price target to $19.
Steelcase focused on reviving its EMEA business
On Tuesday, the Grand Rapids-based company said its revenues for Q4 ending February 28 rose 8% to $779.4 million. Full year 2014 sales were up 4.2% to $2.98 billion. Quarterly sales from the Americas unit surged 13.3% to $558.4 million. But Q4 revenues from the Europe-Middle East-Africa (EMEA) division skidded 11.1% to $149.8 million. Steelcase’s EMEA division suffered a net loss of $31.4 million during the full year 2014. The company reported Q4 profits of $23.9 million or 18 cents a share, and full year profit of $87.7 million or 69 cents per share.
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For the current quarter, Steelcase Inc. (NYSE:SCS) forecasts revenues of $715 million to $740 million, an increase of 7%-11% from the previous year. The company forecasts a net income of 12-15 cents a share. Steelcase CEO James Keane said that the company’s primary focus will be to make its Europe Middle East and Africa (EMEA) business profitable. He said the company can do it by replicating the efficiency model that worked for its American business. Keane took over as the CEO of Steelcase on March 1 after its long-time chief Jim Hackett stepped down. The office furniture manufacturer unveiled its restructuring plan last year to slash costs while boosting its sales efforts.
Why Steelcase is a compelling stock
Raymond James said that the upgrade was driven by better than expected Q4 results and strong Q1 outlook. Solid performance by the Americas segment was partially offset by weaknesses in the Europe, Middle-East and Africa division. The company management is addressing structural issues in the region. Analysts said that Steelcase Inc. (NYSE:SCS) has a diverse industry exposure, strong management, meaningful operating leverage and exciting new products. Together, these factors make a compelling case for investors who want to benefit from the non-residential economic recovery.