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Armstrong World (AWI) Q3 Earnings in Line, Revenues Beat
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Armstrong World (AWI - Free Report) posted adjusted earnings of 76 cents per share in third-quarter 2016 that surged around 28.8% year over year. However, earnings were on par with the Zacks Consensus Estimate.
Operational Update
Net sales increased 1.7% on a year-over-year (excluding the unfavorable impact from foreign exchange of $7 million) basis to $334.9 million. Revenues beat the Zacks Consensus Estimate of $342 million. Cost of sales inched up 0.2% year over year to $225.2 million. Gross profit decreased 1.3% to $109.7 million in the quarter.
Selling, general and administrative (SG&A) expenses slumped 13% year over year to $55.7 million. Adjusted operating income improved 1.1% year over year to $77 million.
Effective Apr 1, 2016, Armstrong World’s Building Products segment was disaggregated into the following three geographical segments: Americas (including Canada), Europe, Middle East and Africa (including Russia) (EMEA) and Pacific Rim.
Americas: Net sales at the Americas segment grew 2% year over year to $226 million driven by improvement in AUV. Adjusted operating income decreased to $72 million in the quarter from $76 million in the prior year quarter, led by higher SG&A expenses and manufacturing costs, as a result ofincreased corporate cost allocation as a result of the AFI separation.
EMEA: The EMEA segment’s sales dropped 5.1% year over year to $74.2 million from $78.2 in the year-ago quarter. Excluding the unfavorable impact of foreign exchange of approximately $1 million, sales increased 1.9% due to higher volumes as higher sales in the Russia were mostly offset by lower sales in the Middle East and continental Europe. Adjusted operating income increased to $5 million from $4 million in the prior year quarter, aided by lower manufacturing and input costs and lower SG&A costs along with higher earnings from WAVE.
Pacific Rim: Net sales in the reported quarter slumped 4.1% year over year to $34.7 million. Excluding the unfavorable impact of foreign exchange of approximately $1 million, sales decreased 1.7%, as improvements in AUV were offset by lower volumes. Operating income was at $1 million compared with break-even results last quarter due to improvements in AUV and lower manufacturing and input costs, which were partially neutralized by lower volumes.
Financials
Armstrong World reported cash and cash equivalents of $142.5 million as of Sep 30, 2016, compared with $250 million as of Sep 30, 2015. The company used $2.64 million of cash in operating activities for the nine-month period ending Sep 30, 2016 compared with cash flow of $144 million in the comparable year-ago period.
Outlook
Armstrong World narrowed its expected ranges for full year 2016 constant currency sales and adjusted EBITDA to $1.24 to $1.27 billion and $315 to $325 million, respectively. Mid-points of both ranges however remain unchanged. Armstrong World now projects adjusted earnings per share to be in the range of $2.20 to $2.30 per diluted share.
Argan has an expected earnings growth rate of 51% for the current year. CRH plc has an expected earnings growth rate of 67.3% for the current year.
Gibraltar has an expected earnings growth rate of 45% for the current year.
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Armstrong World (AWI) Q3 Earnings in Line, Revenues Beat
Armstrong World (AWI - Free Report) posted adjusted earnings of 76 cents per share in third-quarter 2016 that surged around 28.8% year over year. However, earnings were on par with the Zacks Consensus Estimate.
Operational Update
Net sales increased 1.7% on a year-over-year (excluding the unfavorable impact from foreign exchange of $7 million) basis to $334.9 million. Revenues beat the Zacks Consensus Estimate of $342 million. Cost of sales inched up 0.2% year over year to $225.2 million. Gross profit decreased 1.3% to $109.7 million in the quarter.
Selling, general and administrative (SG&A) expenses slumped 13% year over year to $55.7 million. Adjusted operating income improved 1.1% year over year to $77 million.
Segment Performance
Effective Apr 1, 2016, Armstrong World’s Building Products segment was disaggregated into the following three geographical segments: Americas (including Canada), Europe, Middle East and Africa (including Russia) (EMEA) and Pacific Rim.
Americas: Net sales at the Americas segment grew 2% year over year to $226 million driven by improvement in AUV. Adjusted operating income decreased to $72 million in the quarter from $76 million in the prior year quarter, led by higher SG&A expenses and manufacturing costs, as a result ofincreased corporate cost allocation as a result of the AFI separation.
EMEA: The EMEA segment’s sales dropped 5.1% year over year to $74.2 million from $78.2 in the year-ago quarter. Excluding the unfavorable impact of foreign exchange of approximately $1 million, sales increased 1.9% due to higher volumes as higher sales in the Russia were mostly offset by lower sales in the Middle East and continental Europe. Adjusted operating income increased to $5 million from $4 million in the prior year quarter, aided by lower manufacturing and input costs and lower SG&A costs along with higher earnings from WAVE.
Pacific Rim: Net sales in the reported quarter slumped 4.1% year over year to $34.7 million. Excluding the unfavorable impact of foreign exchange of approximately $1 million, sales decreased 1.7%, as improvements in AUV were offset by lower volumes. Operating income was at $1 million compared with break-even results last quarter due to improvements in AUV and lower manufacturing and input costs, which were partially neutralized by lower volumes.
Financials
Armstrong World reported cash and cash equivalents of $142.5 million as of Sep 30, 2016, compared with $250 million as of Sep 30, 2015. The company used $2.64 million of cash in operating activities for the nine-month period ending Sep 30, 2016 compared with cash flow of $144 million in the comparable year-ago period.
Outlook
Armstrong World narrowed its expected ranges for full year 2016 constant currency sales and adjusted EBITDA to $1.24 to $1.27 billion and $315 to $325 million, respectively. Mid-points of both ranges however remain unchanged. Armstrong World now projects adjusted earnings per share to be in the range of $2.20 to $2.30 per diluted share.
ARMSTRONG WORLD Price, Consensus and EPS Surprise
ARMSTRONG WORLD Price, Consensus and EPS Surprise | ARMSTRONG WORLD Quote
Zacks Rank
Armstrong World currently carries a Zacks Rank #2 (Buy).
Some better-ranked companies in the construction space include Argan, Inc. (AGX - Free Report) , CRH plc (CRH - Free Report) and Gibraltar Industries, Inc. (ROCK - Free Report) all sporting a Zacks Rank #1 ( Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Argan has an expected earnings growth rate of 51% for the current year.
CRH plc has an expected earnings growth rate of 67.3% for the current year.
Gibraltar has an expected earnings growth rate of 45% for the current year.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>