Knoll Inc (KNL), Steelcase Inc. (SCS): Will These Underloved Stocks Plump Your Portfolio?

On the conference call Walker detailed progress on their two pronged growth strategy, more consumer retail where the  higher margins are with their purchase of Maharam, and more emerging market exposure with an integration of POSH manufacture, one of their design lines, in China and the construction of a UK facility in Spring 2014 to consolidate EMEA operations.

Finally, the third office furniture play is century old Steelcase Inc. (NYSE:SCS) which is losing its 19 year veteran CEO Jim Hackett next year.The company also offers a 2.70% yield but has a much higher trailing earnings multiple of 50.00 compared to these other two and the industry average of 17.60. Also, its net profit margin at 1.40% is the worst of these.

First quarter revenues declined year over year and EPS was flat which was an improvement over a loss of $0.22 per share in the  preceding quarter.  Although CEO Hackett expressed disappointment in ending a three year streak of consolidated organic growth he noted, “Given that we saw improvement in adjusted operating income even without a rise on the top line, that was worth noting, and that’s true in every segment. Even with the continuing economic challenges in Europe and the kind of sluggishness in Asia, our margins were better and our operating expenses were well controlled.”

The Foolish takeaway

Steelcase Inc. (NYSE:SCS) doesn’t have that retail consumer kicker to offset any government or overall business economy declines and vice versa. For that reason I prefer these other two. It will also likely be a transitional period for several quarters after Hackett retires so I would stay away.

Both Herman Miller and Knoll Inc (NYSE:KNL) are promising with an expansion of their higher margin consumer segment but prefer Herman Miller given its emerging market exposure will likely help them outperform Knoll.

The article Will These Underloved Stocks Plump Your Portfolio? originally appeared on Fool.com and is written by AnnaLisa Kraft.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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