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Apogee Enterprises, Inc. (APOG - Free Report) reported earnings per share of 82 cents in third-quarter fiscal 2018 (ended Dec 2, 2017), up 5% from 78 cents per share recorded in the prior-year quarter. Adjusted earnings of 90 cents per share, however, missed the Zacks Consensus Estimate of $1.04.
The company reported total revenues of around $357 million, surging 30% year over year. However, revenues lagged the Zacks Consensus Estimate of $376 million.
Operational Update
Cost of sales in the quarter flared up 32% year over year to $265 million. Gross profit improved 26% year over year to $91.6 million. Gross margin contracted 90 basis points (bps) to 25.7%. Selling, general and administrative (SG&A) expenses escalated 44% year over year to $57 million. Operating income grew 4% year over year to $34.5 million. Operating margin dipped 240 bps to 9.7%.
Apogee Enterprises, Inc. Price, Consensus and EPS Surprise
Revenues at the Architectural Framing segment soared a whopping 114% year over year to $194 million, driven by recent acquisitions of Sotawall and EFCO. Excluding the acquisitions, revenues rose 17%. Further, revenue growth was backed by elevated sales in the company’s legacy business. The segment’s operating income in the quarter advanced 56% to $18.5 million from $11.8 million registered in the prior-year quarter.
The Architectural Glass Systems segment revenues declined 9% year over year to $97 million, due to delays caused by the Florida hurricane as well as lower volume of large projects. The segment’s operating income descended 22% to $9.1 million from $11.7 million reported in the year-earlier quarter.
Revenues at the Architectural Services segment were down 24% year over year to $49 million. The segment reported an operating profit of $2.5 million, significantly down from $4.9 million recorded in the comparable quarter last fiscal.
The Large-Scale Optical Technologies segment’s revenues went up 18% year over year to $26 million, driven by strong customer orders for holiday framing. Operating income in the reported quarter came in at $6.7 million, increasing 14% from $5.9 million recorded in the year-earlier period.
Backlog
In the Architectural Framing Systems segment, backlog increased to $448.8 million in the fiscal third quarter, up from $164 million reported in the prior-year period. This substantial backlog will likely support growth in the second half of fiscal 2019 and beyond. The Architectural Services’ segment backlog came in at $346.3 million — a $150-million improvement from the year-ago quarter.
Financial Position
As of Dec 2, 2017, Apogee had cash and cash equivalents of $12.8 million compared with $51.6 million recorded as of Nov 26, 2016. The company generated $66 million in cash from operating activities during the nine-month period ending Dec 2, 2017, compared with $72.8 million recorded in the prior-year period. Long-term debt was $231.3 million as of Dec 2, 2017, compared with $65.4 million as of Mar 4, 2017.
Fiscal 2018 Outlook Trimmed
Apogee lowered its fiscal 2018 guidance due to lesser-than-expected volume and pricing, primarily in the architectural glass segment, and higher-than-expected health care costs. In addition, the trimmed outlook reflects charges that will result from restructuring activities in the fourth-quarter fiscal 2018.
Apogee also narrowed its revenue growth guidance to around 20% from the previous growth range of 24-26% for fiscal 2018. The company now expects its adjusted operating margin to lie between 8.6% and 8.9% compared to the prior view of 11-11.5%. It also trimmed its earnings per share guidance for the fiscal year to the range of $2.58-$2.68 from the previous band of $3.05-$3.25.
Fiscal 2019 View
For fiscal 2019, Apogee anticipates double-digit revenue growth and triple-digit basis-point improvement in operating margin. The company expects to incur around $4.5 million for restructuring projects, which is likely to yield roughly $4 million in annual savings in fiscal 2019 and beyond.
Moreover, the company is poised to gain on solid U.S. commercial construction markets, healthy backlog and a solid pipeline of projects, as well as encouraging external market metrics. Further, Apogee’s focus on executing growth strategies and productivity initiatives will fortify its business. Its focus on cost-reduction actions will also stoke growth.
Share Price Performance
Apogee has underperformed the industry with respect to price performance over the past year. The stock has lost around 18.4%, while the industry recorded growth of 8.4% during the same time frame.
Deere has a long-term earnings growth rate of 8.2%. Its shares have rallied 52.9%, year to date.
Kennametal has a long-term earnings growth rate of 8.3%. The company’s shares have been up 55.4% during the same time frame.
Caterpillar has a long-term earnings growth rate of 10.3%. So far this year, shares of the company have gained 67.9%.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report. Download it free >>
Unique Zacks Analysis of Your Chosen Ticker
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Apogee (APOG) Misses on Q3 Earnings & Sales, Trims FY18 View
Apogee Enterprises, Inc. (APOG - Free Report) reported earnings per share of 82 cents in third-quarter fiscal 2018 (ended Dec 2, 2017), up 5% from 78 cents per share recorded in the prior-year quarter. Adjusted earnings of 90 cents per share, however, missed the Zacks Consensus Estimate of $1.04.
The company reported total revenues of around $357 million, surging 30% year over year. However, revenues lagged the Zacks Consensus Estimate of $376 million.
Operational Update
Cost of sales in the quarter flared up 32% year over year to $265 million. Gross profit improved 26% year over year to $91.6 million. Gross margin contracted 90 basis points (bps) to 25.7%. Selling, general and administrative (SG&A) expenses escalated 44% year over year to $57 million. Operating income grew 4% year over year to $34.5 million. Operating margin dipped 240 bps to 9.7%.
Apogee Enterprises, Inc. Price, Consensus and EPS Surprise
Apogee Enterprises, Inc. Price, Consensus and EPS Surprise | Apogee Enterprises, Inc. Quote
Segment Performance
Revenues at the Architectural Framing segment soared a whopping 114% year over year to $194 million, driven by recent acquisitions of Sotawall and EFCO. Excluding the acquisitions, revenues rose 17%. Further, revenue growth was backed by elevated sales in the company’s legacy business. The segment’s operating income in the quarter advanced 56% to $18.5 million from $11.8 million registered in the prior-year quarter.
The Architectural Glass Systems segment revenues declined 9% year over year to $97 million, due to delays caused by the Florida hurricane as well as lower volume of large projects. The segment’s operating income descended 22% to $9.1 million from $11.7 million reported in the year-earlier quarter.
Revenues at the Architectural Services segment were down 24% year over year to $49 million. The segment reported an operating profit of $2.5 million, significantly down from $4.9 million recorded in the comparable quarter last fiscal.
The Large-Scale Optical Technologies segment’s revenues went up 18% year over year to $26 million, driven by strong customer orders for holiday framing. Operating income in the reported quarter came in at $6.7 million, increasing 14% from $5.9 million recorded in the year-earlier period.
Backlog
In the Architectural Framing Systems segment, backlog increased to $448.8 million in the fiscal third quarter, up from $164 million reported in the prior-year period. This substantial backlog will likely support growth in the second half of fiscal 2019 and beyond. The Architectural Services’ segment backlog came in at $346.3 million — a $150-million improvement from the year-ago quarter.
Financial Position
As of Dec 2, 2017, Apogee had cash and cash equivalents of $12.8 million compared with $51.6 million recorded as of Nov 26, 2016. The company generated $66 million in cash from operating activities during the nine-month period ending Dec 2, 2017, compared with $72.8 million recorded in the prior-year period. Long-term debt was $231.3 million as of Dec 2, 2017, compared with $65.4 million as of Mar 4, 2017.
Fiscal 2018 Outlook Trimmed
Apogee lowered its fiscal 2018 guidance due to lesser-than-expected volume and pricing, primarily in the architectural glass segment, and higher-than-expected health care costs. In addition, the trimmed outlook reflects charges that will result from restructuring activities in the fourth-quarter fiscal 2018.
Apogee also narrowed its revenue growth guidance to around 20% from the previous growth range of 24-26% for fiscal 2018. The company now expects its adjusted operating margin to lie between 8.6% and 8.9% compared to the prior view of 11-11.5%. It also trimmed its earnings per share guidance for the fiscal year to the range of $2.58-$2.68 from the previous band of $3.05-$3.25.
Fiscal 2019 View
For fiscal 2019, Apogee anticipates double-digit revenue growth and triple-digit basis-point improvement in operating margin. The company expects to incur around $4.5 million for restructuring projects, which is likely to yield roughly $4 million in annual savings in fiscal 2019 and beyond.
Moreover, the company is poised to gain on solid U.S. commercial construction markets, healthy backlog and a solid pipeline of projects, as well as encouraging external market metrics. Further, Apogee’s focus on executing growth strategies and productivity initiatives will fortify its business. Its focus on cost-reduction actions will also stoke growth.
Share Price Performance
Apogee has underperformed the industry with respect to price performance over the past year. The stock has lost around 18.4%, while the industry recorded growth of 8.4% during the same time frame.
Zacks Rank & Stocks to Consider
Apogee currently has a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Deere & Company (DE - Free Report) , Kennametal Inc. (KMT - Free Report) and Caterpillar Inc. (CAT - Free Report) . While Deere and Kennametal sport a Zacks Rank #1 (Strong Buy), Caterpillar carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere has a long-term earnings growth rate of 8.2%. Its shares have rallied 52.9%, year to date.
Kennametal has a long-term earnings growth rate of 8.3%. The company’s shares have been up 55.4% during the same time frame.
Caterpillar has a long-term earnings growth rate of 10.3%. So far this year, shares of the company have gained 67.9%.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>