Herman Miller, Inc. (NASDAQ: MLHR) had witnessed a slowdown in order growth in the second quarter of fiscal 2020, sending the stock down 22%. The company’s order growth is likely to bounce back, given the strong market fundamentals, according to Sidoti.
Sidoti’s Gregory Burns upgraded Herman Miller from Neutral to Buy, while raising the price target from $43 to $47.
Herman Miller’s earnings release in December reflected lower-than-expected order growth and consequently a disappointing sales forecast for the February quarter, Burns said in the note.
He added, however, that the order growth slowdown seems to be “more of a company specific pocket of weakness,” rather than a general downturn in the demand for office furniture.
The analyst attributed the slowdown mainly to project timing issues, adding that the pipeline of late stage project opportunities had risen by 11% in North America in the second quarter.
The company’s North America business does contribute over 60% of total sales, which is why it is in focus, but the International Contract segment is likely to be a growth catalyst, Burns said. He added that Herman Miller also had the opportunity to boost profitability of the Retail segment.
Shares of Herman Miller had spiked more than 4.22% to $40.28 at time of publication.