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Armstrong World (AWI): Time to Dump Stock from Portfolio?
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Armstrong World Industries Inc. (AWI - Free Report) has been disappointing investors of late. Shares of this global leader in the design and manufacture of innovative commercial and residential ceiling, wall and suspension system solutions, gained a meager 5.5% in 2016. Let’s delve deeper and try to find out why it would be wise to dump the stock from your portfolio for the moment.
Narrowed Guidance
During the third-quarter conference call, the company had narrowed 2016 guidance ranges. The company now expects full-year constant currency sales to be in the range of $1.24–$1.27 billion, adjusted EBITDA to range from $315–$325 million and earnings per share to lie between $2.20 and $2.30. The Zacks Consensus Estimate for fiscal 2016 is pegged at $2.24, below the mid-point of the guidance, projecting a year-over-year decline of 0.30%.
Negative Earnings Surprise History
The company has delivered an average negative earnings surprise of 0.91% in the last four quarters.
Armstrong World Industries Inc Price and EPS Surprise
The estimates for the company for fourth-quarter 2016, fiscal 2016 and fiscal 2017, have moved south in the past 60 days, reflecting the negative outlook of analysts.
For fourth-quarter 2016, the Zacks Consensus Estimate has dipped 4% to 44 cents per share in the past 60 days. For 2016, the estimate has gone down 0.4% to $2.24 and for fiscal 2017, the estimate has declined 1% to $2.73 per share.
Near-Term Headwinds Remain
The company’s revenues will be impacted by weakness in international markets, particularly, the Middle East which has been negatively impacted by lower oil prices and persistent geopolitical uncertainty. Moreover, uncertainty created by Brexit will affect business investment and delay project funding. The company has already experienced some project delays in the region which will disturb growth. In the Pacific Rim, commercial office markets in China continued to experience challenging conditions while India markets were impacted by tight project financing. Further, the underlying fundamentals for repair and remodel (R&R) activity remain uneven as demand is projected to be limited. This is likely to result in choppy R&R activity.
Earnings Beat Unlikely in Q4
Our proven model does not conclusively show that Armstrong World is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Armstrong World’s Zacks Rank #5 (Strong Sell) and a positive earnings ESP of 4.55% makes a beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement.
Falling Behind the Industry
Armstrong World stock has gained 20.8% in the past one year, falling way behind the Zacks categorized Building & Construction Products- Miscellaneous subindustry, which witnessed a gain of 43.9% in the same time frame.
Expensive Valuation
Armstrong World’s valuation looks a bit stretched. Its trailing 12-month price earnings (P/E) ratio is 19.93, which is almost near its high of 21.80 over the last one year. Moroever, it is trading higher than the Zacks categorized Building & Construction Products- Miscellaneous sub industry’s average trailing twelve months P/E ratio of 17.22. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Kennametal has delivered an average positive earnings surprise of 9.90% in the last four quarters. Roper Technologies has delivered an average positive earnings surprise of 0.92% in the trailing four quarters. II-VI Incorporated has an average positive earnings surprise of 59.23% in the past four quarters.
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Armstrong World (AWI): Time to Dump Stock from Portfolio?
Armstrong World Industries Inc. (AWI - Free Report) has been disappointing investors of late. Shares of this global leader in the design and manufacture of innovative commercial and residential ceiling, wall and suspension system solutions, gained a meager 5.5% in 2016. Let’s delve deeper and try to find out why it would be wise to dump the stock from your portfolio for the moment.
Narrowed Guidance
During the third-quarter conference call, the company had narrowed 2016 guidance ranges. The company now expects full-year constant currency sales to be in the range of $1.24–$1.27 billion, adjusted EBITDA to range from $315–$325 million and earnings per share to lie between $2.20 and $2.30. The Zacks Consensus Estimate for fiscal 2016 is pegged at $2.24, below the mid-point of the guidance, projecting a year-over-year decline of 0.30%.
Negative Earnings Surprise History
The company has delivered an average negative earnings surprise of 0.91% in the last four quarters.
Armstrong World Industries Inc Price and EPS Surprise
Armstrong World Industries Inc Price and EPS Surprise | Armstrong World Industries Inc Quote
Estimates Moving South
The estimates for the company for fourth-quarter 2016, fiscal 2016 and fiscal 2017, have moved south in the past 60 days, reflecting the negative outlook of analysts.
For fourth-quarter 2016, the Zacks Consensus Estimate has dipped 4% to 44 cents per share in the past 60 days. For 2016, the estimate has gone down 0.4% to $2.24 and for fiscal 2017, the estimate has declined 1% to $2.73 per share.
Near-Term Headwinds Remain
The company’s revenues will be impacted by weakness in international markets, particularly, the Middle East which has been negatively impacted by lower oil prices and persistent geopolitical uncertainty. Moreover, uncertainty created by Brexit will affect business investment and delay project funding. The company has already experienced some project delays in the region which will disturb growth. In the Pacific Rim, commercial office markets in China continued to experience challenging conditions while India markets were impacted by tight project financing. Further, the underlying fundamentals for repair and remodel (R&R) activity remain uneven as demand is projected to be limited. This is likely to result in choppy R&R activity.
Earnings Beat Unlikely in Q4
Our proven model does not conclusively show that Armstrong World is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Armstrong World’s Zacks Rank #5 (Strong Sell) and a positive earnings ESP of 4.55% makes a beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement.
Falling Behind the Industry
Armstrong World stock has gained 20.8% in the past one year, falling way behind the Zacks categorized Building & Construction Products- Miscellaneous subindustry, which witnessed a gain of 43.9% in the same time frame.
Expensive Valuation
Armstrong World’s valuation looks a bit stretched. Its trailing 12-month price earnings (P/E) ratio is 19.93, which is almost near its high of 21.80 over the last one year. Moroever, it is trading higher than the Zacks categorized Building & Construction Products- Miscellaneous sub industry’s average trailing twelve months P/E ratio of 17.22. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Stocks to Consider
Some better-ranked stocks in the industrial products sector include Kennametal Inc. (KMT - Free Report) , Roper Technologies, Inc. (ROP - Free Report) and II-VI Incorporated . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kennametal has delivered an average positive earnings surprise of 9.90% in the last four quarters. Roper Technologies has delivered an average positive earnings surprise of 0.92% in the trailing four quarters. II-VI Incorporated has an average positive earnings surprise of 59.23% in the past four quarters.
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>