The rising demand for customization, accelerated urbanization, and the widespread popularity of advanced smart home technologies are boosting the home improvement market. Given the industry’s rosy prospects, investors could look into fundamentally strong home improvement stocks, MillerKnoll, Inc. (MLKN), Steelcase Inc. (SCS), and Lifetime Brands, Inc. (LCUT), for weekly gains.
The home improvement market is estimated to grow at a CAGR of 4.3% until 2027. Shifting homeowners' preferences for energy-efficient and luxurious living spaces is significantly contributing to the industry expansion. Rapid urbanization, along with government incentives & tax credits for green building construction, has stimulated market growth.
Additionally, the heightened embrace of advanced smart home technologies is anticipated to stimulate the demand for home improvement services further. The widespread acceptance of home automation solutions is propelled by their convenience, energy efficiency, and cost-saving benefits.
The global smart home market is expected to elevate from an estimated $101.70 billion in 2023 to $163.70 billion by 2028, growing at an impressive CAGR of 10%.
Furthermore, the U.S. DIY home improvement market is expected to grow at a CAGR of 4.7% until 2027. The primary driving factor of the market’s growth is a greater emphasis on DIY home improvement projects for personalized interior design. With the increase in the disposable income of individuals, they are more willing to invest in these projects.
With these favorable trends in mind, let's delve into the fundamentals of the three best Home Improvement & Goods stocks, beginning with the third choice.
Stock #3: MillerKnoll, Inc. (MLKN)
MLKN researches, designs, manufactures, and distributes interior furnishings worldwide. It operates through three segments: Americas Contract; International Contract & Specialty; and Global Retail.
MLKN’s trailing-12-month gross profit margin of 37.70% is 23.9% higher than the 30.42% industry average. Its trailing-12-month asset turnover ratio of 0.89x is 9.5% higher than the 0.81x industry average.
For the second quarter that ended December 2, 2023, MLKN reported net sales of $949.50 million. The company’s operating earnings increased 56.1% year-over-year to $60.40 million. Its net earnings came in at $34.40 million, up 96.6% from the prior year’s quarter. Also, its adjusted EPS rose 28.3% from the year-ago value to $0.59.
In addition, the company’s cash and cash equivalents as of December 2, 2023, were $225.80 million, compared to $197.50 million as of December 2, 2022.
MLKN’s revenue is expected to increase marginally year-over-year to $961.40 million for the fiscal fourth quarter ending May 2024. Its EPS is expected to increase 65.9% year-over-year to $0.68 for the same quarter. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 47.6% over the past six months to close the last trading session at $27.
MLKN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MLKN also has an A grade for Growth and a B in Value and Momentum. It is ranked#3 out of 57 stocks in the B-rated Home Improvement & Goods industry.
To access additional ratings for MLKN’s Stability and Sentiment, click here.
Stock #2: Steelcase Inc. (SCS)
SCS offers a portfolio of furniture and architectural products internationally. The company operates through Americas; EMEA; and other segments. Its portfolio comprises furniture systems, seating, storage, fixed and height-adjustable desks, lighting, task chairs, and textiles. It serves corporate, government, healthcare, education, and retail customers.
SCS’s trailing-12-month gross profit margin of 31.78% is 4.5% higher than the 30.42% industry average. Its trailing-12-month levered FCF margin of 9.59% is 63% higher than the 5.92% industry average.
During the third quarter that ended November 24, 2023, SCS reported revenue of $777.90 million. Its gross profit rose 6.1% from the year-ago value to $252.30 million. Also, the company’s net income and earnings per share came in at $30.8 million and $0.26, increases of 170.1% and 160% year-over-year, respectively.
In addition, as of November 24, 2023, the company’s cash and cash equivalents came in at $262 million versus $90.4 million as of February 24, 2022.
Analysts expect SCS’s EPS to grow 51.9% year-over-year to $0.14 for the first quarter ending May 2024. The company’s revenue is expected to increase 2.3% year-over-year to $769.15 million for the same quarter. Moreover, the company has an impressive earnings surprise history as it surpassed the consensus EPS estimate in all four trailing quarters.
Shares of SCS have gained 59.4% over the past six months to close the last trading session at $12.77.
SCS’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B in Growth, Momentum, and Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated for Stability and Sentiment. Get all SCS ratings here.
Stock #1: Lifetime Brands, Inc. (LCUT)
LCUT designs, sources, and sells branded kitchenware, tableware, and other products for use in the home in the United States and internationally. The company provides kitchenware products, including kitchen tools and gadgets, cutlery, kitchen scales, thermometers, cutting boards, shears, cookware, pantryware, spice racks, and bakeware; and tableware products comprising dinnerware, stemware, flatware, and giftware.
Its trailing-12-month gross profit margin of 36.93% is 4.7% higher than the 35.26% industry average. Its trailing-12-month levered FCF margin of 9.74% is 82.6% higher than the 5.34% industry average.
LCUT's net sales increased 2.7% year-over-year to $191.67 million in the fiscal third quarter ended September 30, 2023. Adjusted EBITDA increased 259.2% year-over-year to $19.65 million. Its net income came in at $4.21 million, compared to a loss of $6.36 million in the previous-year quarter. Also, its net income per common share came in at $0.20, compared to negative $0.30 in the previous-year quarter.
The consensus revenue estimate is of $197.66 million for the fiscal fourth ending December 2023. Its EPS is expected to grow 50% year-over-year to $0.33 for the same quarter. Also, it has surpassed revenue estimates in each of the trailing four quarters.
The stock has gained 36.9% over the past month to close the last trading session at $7.87.
LCUT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
LCUT has an A grade for Growth and Sentiment and a B in Momentum, Value, and Quality. It is ranked first in the same industry.
Click here to see the additional POWR Ratings for LCUT (Stability).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MLKN shares fell $27.00 (-100.00%) in premarket trading Wednesday. Year-to-date, MLKN has gained 1.20%, versus a 2.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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