20% Upside For Steelcase? | Nasdaq

We imagine that Steelcase Inc inventory (NYSE: SCS) could also be a good alternative these days. Steelcase is a US-based furnishings firm producing workplace furnishings, architectural, and know-how merchandise for workplace environments, and to some extent within the schooling, well being care, and retail industries. SCS inventory trades at over $12 at the moment and is, in reality, down 39% up to now this 12 months (from greater than $20 at the start of 2020). It traded at $19 in February 2020 – simply earlier than the coronavirus pandemic hit the world – and is at the moment nonetheless 34% beneath that stage as effectively. SCS inventory has recovered 32% of its worth from its March stage of over $9, in comparison with the S&P 500 which gained nearly 60% from its March lows.  With the gradual lifting of lockdowns the availability constraints are more likely to ease, resulting in modest enchancment in gross sales, which might take the refill by about 20%. Nonetheless, it’s unlikely to return to its pre-Covid stage as a result of a rise within the work-from-home tradition which is resulting in expectations of decrease demand for workplace furnishings. Our conclusion relies on our comparative evaluation of Steelcase inventory efficiency throughout the present monetary disaster with that throughout the 2008 recession in our interactive dashboard.

2020 Coronavirus Disaster

Timeline of 2020 Disaster So Far:

• 12/12/2019: Coronavirus circumstances first reported in China
• 1/31/2020: WHO declares a world well being emergency.
• 2/19/2020: Indicators of efficient containment in China and hopes of financial easing by main central banks helps S&P 500 attain a report excessive
• 3/23/2020: S&P 500 drops 34% from the height stage seen on Feb 19, as COVID-19 circumstances speed up outdoors China. Doesn’t assist that oil costs crash in mid-March amid Saudi-led worth conflict
• Since 3/24/2020: S&P 500 recovers 60% from the lows seen on Mar 23, because the Fed’s multi-billion greenback stimulus bundle suppresses near-term survival nervousness and infuses liquidity into the system.

In distinction, right here is how SCS inventory and the broader market fared throughout the 2007-08 disaster

Timeline of 2007-08 Disaster

• 10/1/2007: Approximate pre-crisis peak in S&P 500 index
• 9/1/2008 – 10/1/2008: Accelerated market decline equivalent to Lehman chapter submitting (9/15/08)
• 3/1/2009: Approximate bottoming out of S&P 500 index
• 12/31/2009: Preliminary restoration to ranges earlier than accelerated decline (round 9/1/2008)

SCS and S&P 500 Efficiency Over 2007-08 Monetary Disaster

SCS inventory declined from ranges of about $19 in September 2007 (pre-crisis peak) to ranges of $four in March 2009 (because the markets bottomed out), implying SCS inventory misplaced 79% from its approximate pre-crisis peak. It recovered put up the 2008 disaster, to ranges of greater than $6 in early 2010, rising by 58% between March 2009 and January 2010. Compared, the S&P 500 Index noticed a decline of 51% and recovered 48%.

SCS Fundamentals Over Current Years

SCS revenues elevated from $3.1 billion in FY2016 to $3.7 billion in FY2020 (SCS’ fiscal 12 months ends in February yearly – eg: FY2020 denotes 12-month interval ending February 2020). With greater revenues, margins additionally elevated with EPS rising from $1.37 in FY2016 to $1.67 in FY2020. Nonetheless, the corporate’s revenues within the first six months of FY2021 noticed a y-o-y decline of 28% as a result of most folks working from house and the demand for workplace furnishings taking place. Earnings got here in at $0.17/share within the first six months of FY2021 as in opposition to $0.29/share within the year-ago interval, primarily as a result of decrease income and better curiosity value together with restructuring bills.

Does SCS Have Ample Money Cushion To Meet Its Obligations By means of The Coronavirus Disaster?

SCS’s whole debt elevated from $297 million in FY2017 to $482 million on the finish of Q2 2021, whereas its whole money went up from $271 million to $516 million over the identical interval. On the similar time, the corporate’s money from operations dropped from $171 million to $45 million within the first six months of FY2021. Decrease working money circulation era is the chance that SCS faces, however the firm has sufficient money steadiness to satisfy its debt obligations.

Conclusion

Phases of Covid-19 Disaster:

• Early- to mid-March 2020: Worry of the coronavirus outbreak spreading quickly interprets into actuality, with the variety of circumstances accelerating globally
• Late-March 2020 onward: Social distancing measures + lockdowns
• April 2020: Fed stimulus suppresses near-term survival nervousness
• Might-June 2020: Restoration of demand, with gradual lifting of lockdowns – no panic anymore regardless of a gradual improve within the variety of circumstances
• July-November 2020: Weak Q1 and Q2 2021 outcomes, however continued enchancment in demand and progress with vaccine growth buoy market sentiment

Regardless of the current surge in the variety of new Covid-19 circumstances within the U.S., we anticipate continued enchancment in demand to buoy market expectations. As buyers focus their consideration on anticipated 2021 outcomes, we imagine Steelcase inventory has the potential for modest positive aspects as soon as fears surrounding the Covid outbreak are put to relaxation. Nonetheless, it’s unlikely to return to its pre-Covid stage as a result of a rise within the work-from-home tradition which is resulting in expectations of decrease demand for workplace furnishings. The inventory is more likely to go as much as $15, reflecting a possible upside of 20% from its present stage

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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.