Furniture maker Herman Miller, Inc. MLHR reported encouraging fiscal second-quarter earnings last week, but one Wall Street analyst said the recently signed corporate tax cut will prove to be a more notable catalyst.
Herman Miller showed order growth in its Q2 report that stemmed from the enhancement of its product offerings and the streamlining of the dealer order process between all of its brands, Bugatch said in a Tuesday note. (See the analyst's track record here.)
Herman Miller continues to benefit from a strong economic environment that favors furniture demand, the analyst said.
Perhaps more important, the passage of a corporate tax cut will likely provide an incentive for office furniture products through the immediate expensing of short-term capital assets, the analyst said. The same tax bill will reduce the company's effective tax rate from management's prior estimate of 29.5-31.5 percent to a new range of 26-28 percent.
Bottom line, Herman Miller's ongoing momentum coupled with benefits from tax policy on two fronts yields a favorable risk-reward profile for the stock, Bugatch said. Raymond James' upside scenario implies a 42-percent return versus a downside loss of just 15 percent.
Shares of Herman Miller closed Tuesday at $39.05, up 2.90 percent.
Photo courtesy of Herman Miller.
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