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After getting knocked down to 52-week lows yesterday, MillerKnoll (MLKN +9%) is kicking back today, basking in an uplifting response despite missing Q3 (Feb) revenue estimates and guiding Q4 (May) figures below consensus. The office and residential furniture maker's results were slightly less upbeat compared to peer Steelcase (SCS +4%), which also reported FebQ numbers last night. However, with shares of MLKN tracking far worse than SCS over the past year, it is enjoying more buoyant price action today despite its bearish guidance, mixed leading indicators, and sluggish overall demand across most geographies.

• The stubborn macroeconomic headwinds, i.e., inflation, interest rates, and tariffs, suppressing business spending and the residential housing industry, clearly hurt MLKN in Q3. While the company squeaked out a bottom-line beat, earnings still contracted by 2% yr/yr to $0.44. Revenue was virtually flat, ticking 0.4% higher yr/yr to $876.2 mln, falling short of estimates for the third time in four quarters. SCS noticed a similar market during FebQ, noting that it continues to navigate an uncertain environment.
• Performance was mixed. For instance, the company witnessed impressive adjusted order growth in Global Retail, especially in North America, where orders surged by 14% compared to a 4% improvement overall. However, in MLKN's North America Contract and International Contract segments, order growth waned, slipping by 1.8% and 1.6% on a reported basis, respectively.
• Order trends in North America Contract started deteriorating in January, concurrent with tariffs and broader macroeconomic uncertainty. However, the silver lining is that trends have since improved, ticking higher yr/yr in February and continuing thus far through March, where orders during the first three weeks have shot up by over 30%. The situation was similar in International Contract, with trends weakening in January. However, while not as robust as North America, orders in March have trended 2% higher yr/yr, an encouraging sign of stabilization.
• However, despite the recent uplifting order trends, Q4 guidance is tracking below analyst forecasts. MLKN expects adjusted EPS of $0.46-0.52 and revs of $910-950 mln. CEO Andrea Owen noted that the relative inconsistency between the order trends and Q4 guidance is due to heightened uncertainty, partly brought on by tariffs. The CEO added that Q4 guidance reflects a prudent approach to the end of the fiscal year, taking into account some of the lumpiness the company endured during Q3.
  • Regarding the tariff situation, MLKN announced a 4.5% list price hike that will take effect on June 2 to help mitigate some of the adverse impacts. MLKN will also use the available flexibility within its supply chain to offset further costs wherever possible.

Investors are pleased by what they saw from MLKN in Q3. With MLKN disclosing the conservative nature of its guidance, perhaps the market is anticipating a healthy beat in Q4, supported by upward order trends from Q3. Still, despite the positive price action, there are reasons to remain cautious. Interest rates remain elevated, creating an unfavorable housing environment. Furthermore, as we saw last quarter, economic improvements can progress much slower than expected, keeping a foothold on a more aggressive rally over the near term.