Global Expansion And Eco-friendly Innovations Will Propel Revenue Growth And Boost Earnings

Key Takeaways

• Expansion in contract and retail segments and strong international orders drive revenue growth and profitability.
  
• Sustainability initiatives and supply chain strategies enhance brand appeal and operational efficiency.
  
• Slower order recovery and international sales declines, along with macroeconomic and geopolitical challenges, threaten MillerKnoll's revenue growth and financial stability.

Catalysts

Researches, designs, manufactures, and distributes interior furnishings worldwide.

• Expansion in the Americas Contract segment, with increased project funnel additions and customer engagement, is expected to drive future revenue growth, contributing to positive earnings momentum.
  
• Strong international order growth, particularly in the Middle East and Asia, positions the company for increased revenue and earnings potential from expanding global markets.
  
• New store openings and a significant increase in product launches in the retail segment are projected to enhance revenue growth and support profitability through an improved retail footprint and product diversification.
  
• The implementation of supply chain strategies and adaptability to potential tariff impacts can help maintain or improve net margins, ensuring cost management and operational efficiency.
  
• Sustainability initiatives, including the elimination of PFAS and introduction of eco-friendly products, are expected to strengthen brand appeal and support sales growth, potentially leading to improved earnings.

MillerKnoll Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MillerKnoll's revenue will grow by 5.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.8% today to 7.9% in 3 years time.
• Analysts expect earnings to reach $331.9 million (and earnings per share of $4.77) by about January 2028, up from $65.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.4x on those 2028 earnings, down from 24.0x today. This future PE is lower than the current PE for the US Commercial Services industry at 32.1x.
• Analysts expect the number of shares outstanding to grow by 0.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.77%, as per the Simply Wall St company report.

MillerKnoll Future Earnings Per Share Growth

Risks

• Order volumes are recovering more slowly than anticipated, potentially indicating softer-than-expected future revenues and earnings if this trend continues.
  
• International orders showed a significant decrease, particularly in non-APMEA regions, which could lead to revenue shortfalls and impact international net margins.
  
• The retail segment experienced a decline in both sales and orders compared to last year, influenced by timing shifts in promotional periods; persistent challenges here could affect future revenue growth and operating margins.
  
• Ongoing macroeconomic uncertainties, particularly in Europe, may affect project-based businesses, leading to volatile revenue streams and impacting overall financial stability.
  
• Potential impacts from tariff changes and geopolitical tensions could lead to increased costs and supply chain disruptions, challenging revenue and net margins if not effectively mitigated.

Valuation

• The analysts have a consensus price target of $31.5 for MillerKnoll based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $25.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.2 billion, earnings will come to $331.9 million, and it would be trading on a PE ratio of 8.4x, assuming you use a discount rate of 8.8%.
• Given the current share price of $22.9, the analyst's price target of $31.5 is 27.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.