Press Release: S&Pgr Revises Millerknoll Otlk To -2

Investors in MillerKnoll, Inc. MLKN need to pay close attention to the stock based on moves in the options market lately. That is because the Nov 15, 2024 $15.00 Call had some of the highest implied volatility of all equity options today.

What is Implied Volatility?

Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is an event coming up soon that may cause a big rally or a huge sell off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.

What do the Analysts Think?

Clearly, options traders are pricing in a big move for MillerKnoll share, but what is the fundamental picture for the company? Currently, MillerKnoll is a Zacks Rank #4 (Sell) in the Furniture industry that ranks in the Bottom 27% of our Zacks Industry Rank. Over the last 60 days, no analyst has increased his estimate for the current quarter, while one has revised his estimate downward. The net effect has taken our Zacks Consensus Estimate for the current quarter from 60 cents per share to 54 cents per share in the same time period.

Given the way analysts feel about MillerKnoll right now, this huge implied volatility could mean there’s a trade developing. Often times, options traders look for options with high levels of implied volatility to sell premium. This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected.

Looking to Trade Options?

Check out the simple yet high-powered approach that Zacks Executive VP Kevin Matras has used to close recent double and triple-digit winners. In addition to impressive profit potential, these trades can actually reduce your risk.

Click to see the trades now >>

Zacks Investment Research

MillerKnoll, Inc. MLKN reported disappointing first-quarter fiscal 2025 (ended Aug. 31, 2024) results, wherein adjusted earnings and net sales missed the Zacks Consensus Estimate and declined year over year.

The quarter’s results were exposed to the negative impacts of the ongoing uncertain housing market scenario. This negative impact was reflected in the soft contributions from MLKN’s reportable segments. Furthermore, the decline in the top line and increased operating expenses marred the bottom line during the quarter.

The company’s prospects are subject to housing market improvements and macroeconomic stability, which are expected in the latter half of fiscal 2025. Also, the increased backlog levels at the end of the quarter, accompanied by diversification, international expansion, technological investments, streamlined processes and innovation, are likely to support the near-term prospects.

Post the earnings release, MLKN stock lost 5.3% in the after-hours trading session on Thursday.

MLKN’s Q1 in Detail

The company reported adjusted earnings of 36 cents per share, which missed the Zacks Consensus Estimate of 42 cents by 14.3%. In the prior-year quarter, it reported adjusted earnings per share (EPS) of 37 cents.

Net sales of $861.5 million missed the consensus mark of $892 million by 3.4%. The metric also declined 6.1% from the prior-year quarter’s $917.7 million.

MillerKnoll, Inc. Price, Consensus and EPS Surprise

MillerKnoll, Inc. price-consensus-eps-surprise-chart | MillerKnoll, Inc. Quote

Organically, net sales were down 5.3% year over year. On the other hand, orders amounted to $935.9 million, up 2.4% on a reported basis and 3.5% on an organic basis from the prior year’s level.

MLKN’s Segmental Details

Americas Contract: Net sales declined 7.3% on a reported basis and 7% organically from the prior-year quarter’s level to $454.6 million. New orders amounted to $512.7 million, up 5.2% year over year.

The adjusted operating margin contracted 110 basis points (bps) year over year to 9.5%. The downside can be attributed to the loss of leverage of fixed costs on lower sales volume.

International Contract and Specialty: Net sales declined 6.5% on a reported basis and 6.3% organically from the prior-year quarter’s level to $213.5 million. New orders were $234.1 million, up 2.7% on a reported basis and 3.1% on an organic basis year over year because of increased order growth from the APMEA region.

The adjusted operating margin expanded 140 bps year over year to 7.9%, driven by prior cost reduction initiatives undertaken by the company.

Global Retail: This segment’s net sales declined 2.8% on a reported basis to $193.4 million and were flat organically from the prior-year quarter’s level. New orders amounted to $189.1 million, down 4.7% year over year on a reported basis and 1.6% organically.

The adjusted operating margin expanded 120 bps year over year to 2.8%. The upside was backed by significant improvements in operational efficiencies.

MillerKnoll’s Operating Highlights

In the fiscal first quarter, MLKN’s gross margin remained flat year over year at 39%.

Consolidated adjusted operating expenses declined 5.2% year over year to $286.9 million, primarily due to variability in lower net sales and cost synergies achieved through the acquisition of Knoll.

The adjusted consolidated operating margin contracted 20 bps year over year to 5.8%.

Financials of MLKN

As of Aug. 31, 2024, MillerKnoll had $488.4 million in liquidity. It had $209.7 million of cash and equivalents at the fiscal first-quarter end, down from $230.4 million in the fiscal 2024 end.

Long-term debt increased to $1.32 billion from $1.29 billion reported at the end of fiscal 2024.

As of the end of the fiscal first quarter, cash provided by operating activities was $21.1 million compared with $130.9 million in the prior-year period. The company repurchased approximately 1.5 million shares with a total cash outlay of $43.7 million.

MillerKnoll’s Q2 and Fiscal 2025 Guidance

For the fiscal second quarter, MillerKnoll expects net sales to be in the range of $950-$990 million compared with $949.5 million reported in the prior-year quarter. Adjusted EPS is expected to be in the range of 51-57 cents compared with 59 cents reported in the prior-year quarter.

For fiscal 2025, MLKN now expects adjusted EPS to be $2.20, which is the midpoint of the earlier expected range of $2.10-$2.30. This compares with the earnings of $2.08 per share reported in fiscal 2024.

MLKN’s Zacks Rank & Key Picks

MillerKnoll currently carries a Zacks Rank #3 (Hold).

Here are some better-ranked stocks from the Consumer Discretionary sector.

Interface, Inc. TILE currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TILE has a trailing four-quarter earnings surprise of 65%, on average. The stock has surged 90% in the past year. The Zacks Consensus Estimate for TILE’s 2024 sales and EPS indicates growth of 3.9% and 28%, respectively, from the year-ago levels.

DoubleDown Interactive Co., Ltd. DDI currently sports a Zacks Rank of 1. DDI has a trailing four-quarter earnings surprise of 22.1%, on average. The stock has gained 49.3% in the past year.

The Zacks Consensus Estimate for DDI’s 2024 sales and EPS indicates an increase of 12.6% and 15.8%, respectively, from the year-ago levels.

Norwegian Cruise Line Holdings Ltd. NCLH presently sports a Zacks Rank of 1. NCLH has a trailing four-quarter earnings surprise of 5.7%, on average. The stock has gained 19.4% in the past year.

The Zacks Consensus Estimate for NCLH’s 2024 sales and EPS indicates an increase of 9.8% and 125.7%, respectively, from the year-ago levels.

Zacks Investment Research