Reversal Potential in MillerKnoll (MLKN): Is the Furniture Giant on the Cusp of a Comeback?

In the world of contrarian investing, the allure of undervalued stocks often lies in their ability to defy market pessimism. MillerKnoll (MLKN), the furniture giant navigating a post-pandemic landscape, has drawn both skepticism and cautious optimism. With a stock price languishing at $16.64-well below the $38.00 consensus analyst price target-investors are left to weigh whether the company's recent earnings-driven signals and strategic pivots could catalyze a meaningful reversal.

A Tale of Two Margins: Cost Synergies and Structural Pressures

MillerKnoll's fiscal 2023 results revealed a mixed bag of resilience and fragility. While the company achieved $4.1 billion in net sales-a 3.6% year-over-year increase-it faced margin compression in key segments. Adjusted operating margins for the full year rose by 60 basis points, driven by $131 million in cost synergies from the Knoll acquisition. However, return on capital employed (ROCE) has dipped to 7.7%, lagging behind the Commercial Services industry average of 10%, signaling structural inefficiencies.

The recent Q2 2026 earnings report, however, offered a glimmer of hope. Despite a 1.6% year-over-year sales decline, the company exceeded internal expectations with adjusted earnings per share (EPS) of $0.43, bolstered by a 39% gross margin. This outperformance, coupled with 5.5% year-over-year order growth, suggests that MillerKnoll's cost-optimization strategies may be gaining traction. Yet, the persistent drag from tariffs and weak North American contract orders raises questions about the sustainability of these gains.

Contrarian Signals: Orders vs. Sales

One of the most compelling contrarian indicators lies in the divergence between orders and sales. For Q2 2026, MillerKnoll reported $973 million in orders-a 5.5% year-over-year increase-while net sales fell by 1.6%. This disconnect hints at a potential normalization of demand, particularly in the Global Retail segment, where organic order growth of 4.5% outpaced net sales growth of 3.4%. Such momentum could signal pent-up demand in resilient markets like healthcare and the public sector, areas the company has prioritized in its long-term strategy.

However, the pull-forward of sales in the Americas Contract segment-a 3.1% decline in Q2 net sales-underscores near-term volatility. Analysts project a 3% revenue decline for Q4 2025 compared to the prior year, a forecast that could weigh on investor sentiment if not offset by stronger order conversion in the back half of the fiscal year.

The Price Target Paradox: Optimism vs. Realism

The $38.00 price target for MLKN, based on projected 2028 revenues of $4 billion and earnings of $293 million, assumes a 10.8x price-to-earnings (PE) multiple-a 30% discount to the industry average. While this implies a margin of safety for contrarian investors, achieving these metrics requires MillerKnoll to navigate a thorny operating environment.

The company's recent non-GAAP profit of $0.45 per share-31.1% above expectations-demonstrates its ability to exceed forecasts in a low-growth context. Yet, the path to $293 million in earnings by 2028 hinges on resolving margin pressures from tariffs and stabilizing demand in North America. With ROCE underperforming peers and liquidity constraints (despite $48.4 million in debt repayment in Q4 2023), the road to recovery is far from guaranteed.

A Contrarian Verdict: Buy the Dip or Beware the Pit?

For investors with a long-term horizon, MillerKnoll's current valuation offers a compelling risk-reward profile. The stock's 12.74% rebound in the past month suggests short-term optimism, while its 31.48% year-to-date decline reflects lingering doubts. The key question is whether the company's integration of Knoll, retail expansion (14–16 new stores planned for fiscal 2026), and focus on high-growth sectors can offset structural headwinds.

However, contrarians must also acknowledge the risks. A prolonged stagnation in North American contract orders, coupled with the company's underwhelming ROCE, could delay-or even derail-the recovery narrative. As one analyst noted, "MillerKnoll's turnaround hinges on demand stabilization and margin resilience-both of which remain unproven."

In conclusion, MillerKnoll is neither a slam-dunk buy nor a certain bust. For those willing to bet on its ability to execute its cost-optimization playbook and capitalize on resilient markets, the current discount offers a speculative opportunity. But for risk-averse investors, the company's structural challenges and mixed analyst sentiment warrant caution. The furniture giant's comeback, if it comes, will likely be a slow and bumpy ride.