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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<ul>
<li>The office furniture group fell 6% last week, breaking a streak of outperformance, as indicators pointed to weakness.</li>
<li>The office furniture group is up ~21% in 2023 and 32% over the past 12 months.</li>
<li>The Architectural Billings Index (ABI), a diffusion index and key leading indicator of non-residential construction activity (9-12 months), fell to 44.8 in September from 48.1 in August (AIA). </li>
</ul>


The office furniture group fell 6% last week, breaking a streak of outperformance, as indicators pointed to weakness.
The office furniture group is up ~21% in 2023 and 32% over the past 12 months.
The Architectural Billings Index (ABI), a diffusion index and key leading indicator of non-residential construction activity (9-12 months), fell to 44.8 in September from 48.1 in August (AIA). 


Furniture/Furnishings Weekly - Weak Signals for Office Furniture

<div><div><div><div><ul style="list-style-type: disc;"><li><p>The Fall Furniture Market in High Point, N.C. brought the industry together last week to do business, celebrate successes, and commiserate.</p></li><li><p>We spent the day Saturday, the official opening day, while buyers and vendors had been there since the prior Tuesday.</p></li><li><p>The sky over High Point was gray and wet. So was the mood.</p></li></ul></div></div></div></div>

The Fall Furniture Market in High Point, N.C. brought the industry together last week to do business, celebrate successes, and commiserate.We spent the day Saturday, the official opening day, while buyers and vendors had been there since the prior Tuesday.The sky over High Point was gray and wet. So was the mood.

Furniture/Furnishings Weekly - Gray Skies over High Point; Cloudy Conditions for Industry

<ul style="list-style-type: disc;"><li><p>In a week when the broad market indexes retreated by ~3%, the positive earnings report from Steelcase, Inc. (SCS) provided a boost for all the Commercial/Contract Furniture issues.</p></li><li><p>SCS results supported a view that demand in the office furniture sector had troughed.</p></li><li><p>CFO Dave Sylvester noted that the weekly pace of orders in its Americas segment was steady through its fiscal 2Q and into 3Q and that the Y/Y order comparison for the first few weeks of September was up by ~18%. For details, see our update note from September 22.</p></li></ul>

In a week when the broad market indexes retreated by ~3%, the positive earnings report from Steelcase, Inc. (SCS) provided a boost for all the Commercial/Contract Furniture issues.SCS results supported a view that demand in the office furniture sector had troughed.CFO Dave Sylvester noted that the weekly pace of orders in its Americas segment was steady through its fiscal 2Q and into 3Q and that the Y/Y order comparison for the first few weeks of September was up by ~18%. For details, see our update note from September 22.

Furniture/Furnishings Weekly - SCS Results Boost Commercial/Contract Furniture Sector

<div><div><div><ul style="list-style-type: disc;"><li><p>Herein we inaugurate the WTR Furniture/Furnishings Weekly. Under “Statistics”, we recap stock price performance for select issues in three sectors: Commercial/Contract Furniture, Residential Manufacturers &amp; Suppliers, and Home Goods Retailers.</p></li><li><p>Inside, we present data on company operating performance and valuation. Pertinent economic data/charts to furniture/furnishings issues follow.</p></li><li><p>This front-page column, and additional text, if needed, will be devoted to news tidbits.</p></li></ul></div></div></div>

Herein we inaugurate the WTR Furniture/Furnishings Weekly. Under “Statistics”, we recap stock price performance for select issues in three sectors: Commercial/Contract Furniture, Residential Manufacturers &amp; Suppliers, and Home Goods Retailers.Inside, we present data on company operating performance and valuation. Pertinent economic data/charts to furniture/furnishings issues follow.This front-page column, and additional text, if needed, will be devoted to news tidbits.

Inaugural Industry Report Tracks Stocks, Fundamentals, and Economic Drivers

Equity Bottom-Up

<ul style="list-style-type: disc;"><li><p>Herein we revise and update MLKN estimates following MillerKnoll's FY23 earnings report and FY24 guidance.</p></li><li><p>Our 1QFY24 diluted non-GAAP EPS estimate is now $0.20, down $0.10 from our previous (reduced) $0.30 estimate.</p></li><li><p>Our FY24 annual estimate is now $1.82 (down from $2.00), below the midpoint of the $1.70-$2.00 management outlook.</p></li></ul>

Herein we revise and update MLKN estimates following MillerKnoll's FY23 earnings report and FY24 guidance.Our 1QFY24 diluted non-GAAP EPS estimate is now $0.20, down $0.10 from our previous (reduced) $0.30 estimate.Our FY24 annual estimate is now $1.82 (down from $2.00), below the midpoint of the $1.70-$2.00 management outlook.

MillerKnoll, Inc. - Refreshing Estimates and Presenting New Model

United States

HNI Corporation manufactures and markets office furniture as well as hearth products. The Company's products are sold primarily through dealers, wholesalers, and retail superstores. HNI has operations in the United States and Canada.

KAR Auction Services Inc. provides wholesale vehicle auction services in North America.  The Company facilitates a marketplace providing auction services for sellers of used and salvage vehicles through physical auction locations and multiple proprietary Internet websites.

CoreCivic, Inc. provides detention and corrections services to governmental agencies. The Company designs, constructs, owns, manages, and renovates jails, prisons, government agencies, and inmate transportation companies. CoreCivic operates throughout the United States.

VSE Corporation provides diversified services and products to the engineering, energy, environment, health care, information technology, and defense services markets.  The Company's principal customers include agencies of the United States government and other prime contractors.  VSE provides services and products from locations across the United States and around the world.

Steelcase Inc. designs and manufactures products used to create high performance work environments.  The Company's products include office furniture, furniture systems, interior architectural products, technology products, seating, and related products and services.  Steelcase has operations in various countries.

Pitney Bowes Inc. sells and finances, rents, and services integrated mail and document management systems.  The Company offers a full suite of equipment, supplies, software and services for end-to-end mailstream solutions.

McGrath RentCorp rents and sells relocatable modular offices, as well as electronic test and measurement instruments.  The Company's offices are used as temporary offices adjacent to existing facilities, and as sales offices, construction field offices, classrooms, and for a variety of other purposes. McGrath serves customers primarily in California and Texas.

SP Plus Corporation provides parking facility management services in the United States and Canada. The Company provides on-site management services at multi-level and surface parking facilities in the urban parking and airport parking markets. SP's clients include owners of office building complexes, shopping centers, sports complexes, hotels, hospitals, and various airports.

Interface, Inc. manufactures, markets, installs, and services products for the commercial and institutional interiors market.  The Company provides modular carpet, panel fabrics for use in open plan office furniture systems, and complementary products, as well as carpet replacement, installation, and maintenance services.  Interface markets its products around the world.

Montrose Environmental Group, Inc. operates as an environmental company. The Company offers air quality and environmental laboratory services. Montrose Environmental Group serves to the landfills, electric utilities, water treatment facilities, municipalities, and corporations worldwide.

Taiwan Secom Co Ltd provides diversified technology-based integrated security solutions for commercial enterprises and residences.  The Company monitors and maintains security systems devices, such as burglar and fire alarms for offices, shops, parking lots, and residences.  Taiwan Secom also provides security system consulting, designing, engineering, and integration services.

Park24 Co., Ltd. operates 24-hour automated parking garages, monthly parking lots, and parking lot administration.  The Company also sells parking lot equipment of gate-type and multistory-type such as park lock.

Downer EDI Limited provides engineering and infrastructure management services to the public and private rail, road, power, telecommunications, mining and resources sectors in Australia, New Zealand, Asia and the Pacific.  Downer provides rolling stock services, drilling services for the exploration industry, mine planning and management services and highway maintenance.

KOKUYO CO., LTD. manages Kokuyo group companies that produces and sells a vast line of stationery goods and office furniture through a domestic sales network as a holding company.  The group's products include magazine files, box binders, drawing tubes, desk chairs, lockers, and wall storage units.  Kokuyo also manufactures office automation equipment and computer supplies.

Cimpress Public Limited Company provides printing services. The Company serves customers in Ireland.

Beijing Originwater Technology Co., Ltd. provides sewage treatment and sewage facility development services.  The Company's services include sewage treatment plant construction and design, equipment integration solution, and technical support services.

Beijing Originwater Technology Co,Ltd. (300070 CH)

L&K Engineering Co., Ltd. designs, builds, and manages clean rooms for semiconductor, biochemical, and electronic industries.  The Company also provides wire engineering service.

Bilfinger SE provides industrial services, power services, building and facility services, construction, and concessions.  The Company's industrial services include repairs, maintenance, and modernization.  Bilfinger also provides power services which include maintenance, service, and efficiency enhancements as well as building and facility services for real estate.

Mitie Group plc provides a variety of services to both owners and occupiers of commercial and industrial properties.  The Group divides its business into two areas, building services and support services.  Their building operations encompass air conditioning, industrial painting, and engineering services, while their support services include catering, cleaning, security, and waste services.

Bravida Holding AB provides technical installation and service solutions for buildings and plants. The Company offers integrated solutions in electrical installations, heating and plumbing, and HVAC. Bravida Holding serves customers in Sweden, Norway, and Denmark.

MillerKnoll, Inc. researches, designs, manufactures, and distributes interior office furnishings, furniture systems, products, and services. The Company markets its products to companies, organizations, and individuals worldwide.

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MillerKnoll (MLKN US)

Furniture/Furnishings Weekly - Weak Signals for Office Furniture

The office furniture group fell 6% last week, breaking a streak of outperformance, as indicators pointed to weakness. The office furniture group is...

Water Tower Research

Furniture/Furnishings Weekly - Gray Skies over High Point; Cloudy Conditions for Industry

The Fall Furniture Market in High Point, N.C. brought the industry together last week to do business, celebrate successes, and commiserate.

Water Tower Research

Furniture/Furnishings Weekly - SCS Results Boost Commercial/Contract Furniture Sector

In a week when the broad market indexes retreated by ~3%, the positive earnings report from Steelcase, Inc. (SCS) provided a boost for all the...

Water Tower Research

Inaugural Industry Report Tracks Stocks, Fundamentals, and Economic Drivers

Under “Statistics”, we recap stock price performance for select issues in three sectors: Commercial/Contract Furniture, Residential Manufacturers &...

Water Tower Research

MillerKnoll, Inc. - Refreshing Estimates and Presenting New Model

Herein we revise and update MLKN estimates following MillerKnoll's FY23 earnings report and FY24 guidance.Our 1QFY24 diluted non-GAAP EPS estimate...

Water Tower Research

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