HNI: Strong Earnings Beat For This Undervalued Dividend Growth Stock

Every so often, companies need to restructure the way they do business. The simple reality is that things change, and businesses have to adapt. This can cause short-term challenges and reductions of earnings, and stock prices usually suffer as a result.

But we believe this can also create opportunities for long-term investors, particularly if the underlying core business remains strong. In these instances, high-quality dividend growth stocks that are temporarily struggling, can be attractive buying opportunities.

HNI Corporation (HNI) is an example of this. HNI has a long history of growth and a leadership position in its industry. It also has a secure 3% dividend yield. You can see all 747 dividend-paying industrial stocks here.

The company has had to turn itself around, due to changes in its operating climate. As a result, the stock has significantly underperformed the S&P 500 Index in the past one year.

However, we feel HNI is still a strong company, that is simply undergoing some short-term bumps in the road. HNI’s recent fourth-quarter earnings report showed important progress in its turnaround initiatives.

Earnings Overview

HNI designs office furniture, and also designs and manufactures hearth products. It has an extensive product portfolio. Products include filing cabinets, desks, chairs, wall systems, gas-and-wood-burning fireplaces, inserts, stoves, facings, and accessories.

(Click on image to enlarge)

HNI Overview

Source: Fourth Quarter Investor Presentation, page 4

For its 2017 fourth quarter, HNI reported earnings-per-share of $0.47, on revenue of $584.28 million. Both figures beat analyst expectations, which called for earnings-per-share of $0.42, on revenue of $567.83 million.

On a year-over-year basis, HNI’s quarterly results showed modest growth. Net sales rose 0.5%, while organic revenue, which excludes the impact of currency fluctuations and divestments, rose 3.7% versus the same quarter a year ago.

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