What HNI (HNI) Said on Its Q3 Earnings Call

Key Points

• HNI beat its internal expectations in Q3 fiscal 2026: Non-GAAP EPS rose nearly 50% to $1.62, while organic sales grew 6%; total sales more than doubled year over year, largely reflecting the Steelcase acquisition.
• Both segments delivered growth, with Workplace Furnishings organic sales up 6% and Residential Building Products revenue up 5%. Steelcase synergies are ahead of plan, and HNI raised its target for annual operating-profit synergies to at least $130 million.
• HNI reaffirmed 2026 non-GAAP EPS growth guidance of 20%–25% and expects double-digit EPS growth again in 2027. Its outlook notes ongoing pressure in new home construction and temporary Steelcase cost headwinds.

HNI NYSE: HNI reported third-quarter fiscal 2026 results that exceeded its internal expectations, supported by volume growth in both its Workplace Furnishings and Residential Building Products segments, productivity initiatives, favorable price-cost dynamics and contributions from the Steelcase acquisition.

Chairman, President and CEO Jeff Lorenger said non-GAAP diluted earnings per share totaled $1.62, up nearly 50% from the prior-year period. GAAP diluted EPS was $1.23. Total net sales increased 133% year over year, reflecting the Steelcase acquisition, while organic sales increased 6%.

“Both segments reported volume and order growth in the quarter, while we continued to effectively manage the middle of the income statement,” Lorenger said. He said profit improvement versus the prior year was driven by Steelcase, operating productivity, price-cost benefits and organic volume growth.

Workplace Furnishings Gains Momentum

Workplace Furnishings sales increased 6% organically during the quarter, including 2% volume growth. Orders in the segment rose 6% from a year earlier, with contract-customer order growth outperforming small and medium-sized business demand. Steelcase order growth was stronger than that of HNI’s legacy Workplace Furnishings operations, according to Executive Vice President and Chief Financial Officer VP Berger.

Excluding Steelcase, non-GAAP Workplace Furnishings segment operating margin expanded 390 basis points year over year to a third-quarter record of 16.2%, Lorenger said. Including Steelcase, non-GAAP operating income more than doubled from the prior-year level.

Company executives pointed to improving conditions in commercial office markets, including return-to-office trends, office leasing activity and positive net absorption. Lorenger said Class A peak-day office occupancy in the top 10 metropolitan statistical areas had risen above 95%, while office leasing activity increased for a fifth consecutive quarter in the third quarter.

He also cited more than 6 million square feet of positive office-space absorption during the quarter and 10 million square feet of nonviable space taken offline. Lorenger said these conditions could create furniture opportunities as tenants relocate or reconfigure offices.

“Our funnel continues to expand, with third quarter bid quotes up solidly year-over-year,” Lorenger said, adding that customer visits, requests for proposals and design requests were strong and that win rates were improving.

However, executives said some large projects have been delayed, partly due to labor constraints. Lorenger also identified softness in education and state and local government demand, though he described those areas as smaller portions of the business.

Steelcase Synergies Ahead of Plan

HNI said integration work following its Steelcase acquisition remains on schedule and that synergy capture is running ahead of plan. The company now expects at least $130 million in annual operating-profit synergies when fully mature, up from its original $120 million target.

The initial $120 million synergy objective is now expected to be achieved by the end of the fourth year, earlier than previously anticipated. Berger said the company has made more progress than expected in public-company cost reductions and general and administrative expenses, while future incremental benefits are expected to come primarily from procurement, logistics and manufacturing-network optimization.

HNI’s synergy projections currently apply only to Steelcase’s Americas operations and do not include potential revenue synergies. Lorenger said the company has begun pursuing initiatives to expand sales of HNI open-line brands through its dealer networks, describing the effort as the “HNI portfolio initiative.”

Steelcase contributed to earnings in the third quarter, but HNI now expects the business to be neutral to full-year 2026 EPS because of international profit pressures and temporary price-cost headwinds. Lorenger said international markets have been affected by geopolitical turmoil and softer demand, though the company is continuing to evaluate its cost structure and profitability in those markets.

HNI expects pricing actions to restore price-cost neutrality in 2027. Berger said higher diesel and steel costs resulted in a projected $0.10 to $0.15 fourth-quarter drag, but the company expects to recover that pressure through actions taken in the fourth quarter and first quarter of 2027.

Residential Building Products Outperforms Housing Market

Residential Building Products revenue increased 5% in the third quarter, including 4% volume growth. The segment’s remodel-retrofit business delivered double-digit revenue growth, more than offsetting continued weakness in new construction.

Operating profit in the segment rose 16% year over year, while operating margin expanded 180 basis points. Lorenger attributed the performance to organizational changes, growth investments and an operating model focused on customers and diversified revenue streams.

“Revenue from the remodel-retrofit business increased double digits and more than offset continued market-driven weakness in the new construction channel,” Lorenger said.

The company expects ongoing challenges in new residential construction, citing elevated interest rates, high prices and affordability concerns. HNI expects 2027 to remain challenging for new construction, but said it expects modest market growth in remodel-retrofit through the remainder of 2026 and into the first half of 2027.

Fourth-Quarter and 2027 Outlook

For the fourth quarter, HNI expects legacy Workplace Furnishings sales to increase at a low-single-digit rate year over year, including a roughly 3-percentage-point headwind related to an extra week in the prior-year quarter. Excluding that calendar impact, legacy Workplace Furnishings sales are expected to rise at a mid-single-digit rate.

Residential Building Products sales are expected to be roughly flat year over year in the fourth quarter, or up at a low-single-digit rate excluding the extra-week impact. HNI expects total Workplace Furnishings sales, including Steelcase, to nearly double from the prior-year period.

The company expects fourth-quarter non-GAAP EPS to rise in the mid-20% range from the fourth quarter of 2025. For full-year 2026, HNI reaffirmed its outlook for non-GAAP EPS growth of 20% to 25% from 2025 EPS of $3.46.

Looking ahead, HNI expects double-digit non-GAAP EPS growth again in 2027. The company said its outlook does not depend on top-line growth, although it expects net sales to improve next year. HNI also expects roughly $30 million in savings from legacy Workplace Furnishings manufacturing-network optimization, with about one-third expected in 2026 and the remainder split between 2027 and 2028.

HNI reduced leverage during the quarter, with debt leverage declining to 2.0 times from 2.4 times in the previous quarter. The company said it expects leverage to return to pre-Steelcase acquisition levels of 1.5 times or less within 18 to 24 months of the December 2025 deal closing.

About HNI (NYSE:HNI)

HNI Corporation NYSE: HNI, headquartered in Muscatine, Iowa, is a workplace and residential building products company. Its businesses serve organizations, businesses, education and government customers, as well as residential consumers through office furnishings and hearth products.

HNI's workplace furnishings portfolio includes desks, tables, seating, storage, collaborative products and related workplace solutions. Its brands include HON, Allsteel, HBF and Gunlocke, among others. The company sells products through dealers, retailers, e-commerce channels and other distribution partners, primarily serving customers in North America.

Through its hearth products business, HNI manufactures fireplaces, inserts, stoves and related products fueled by gas, wood and pellets.

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