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Apogee Enterprises

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Apogee Enterprises, Inc. (APOG - Free Report) climbed to a new 52-week high on September 20, 2012 after reporting its forecast-topping second quarter results. This industrial glass maker raised its earnings guidance for fiscal 2013, sparking upward revisions from analysts that boosted the Zacks Consensus Estimate.

This Zacks #2 Rank (“Buy”) fits the bill for aggressive growth investors, given its rising estimates, solid double-digit earnings growth projection for this year, favorable building industry trends, strong architectural backlog and the healthy performance of its framing glass and acrylic business.

Sixth Straight Beat

Apogee Enterprises reported solid second-quarter fiscal 2013 results on September 19, including earnings per share of 17 cents that reversed a loss of 6 cents a year ago. The result comfortably beat the Zacks Consensus Estimate of 9 cents by nearly 90%, marking the sixth positive surprise over the last seven quarters.

Revenues rose 6% year over year to $175.9 million, driven by growth across the board. Gross margin improved to 20.5% from 15.7% a year ago.

Revenues from the core Architectural Products and Services segment rose 5% year over year to $156.4 million, fueled by share gains in the storefront and installation businesses. The segment returned to profit in the quarter. Moreover, the division’s backlog climbed 32% and reached its highest level in twelve quarters.

Sales from the Large-Scale Optical Technologies division surged 19% to $19.6 million. The improvement stemmed from higher value-added glass and acrylic mix across picture framing sectors.

Apogee raised its earnings guidance for fiscal 2013 to between 56 cents and 64 cents per share from the previous guidance of 48 cents to 58 cents. It expects revenue growth in the mid single-digits, driven by share gains in the architectural businesses.

Earnings Estimates Shoot Higher

For fiscal 2013, all three estimates have been revised higher in the last 30 days, pushing the Zacks Consensus Estimate upward by 18% to 66 cents a share. This reflects an estimated annualized growth of roughly 198.5%.

All three estimates have moved higher for fiscal 2014 as well, sending the Zacks Consensus Estimate up by 20% to 95 cents per share. This represents an estimated year over year growth of 44.7%.

Valuation: Stretched but Justified

Apogee’s valuation appears expensive on a P/E basis. Its trailing twelve months P/E of 36.39x is much higher than the peer group average of 6.56x. Moreover, the stock is currently trading at a forward P/E of 29.92x, which is well above the peer group average of 12.45x. The price-to-book of 1.72x is in line with the peer group average. Given the robust earnings trajectory, the premium valuation should not scare investors away.

Bullish Technicals

Technical indicators show that Apogee has been above its 200-day moving average since late 2011. Moreover, after a series of peaks and troughs, the stock is trading above its 50-day moving average of late. Notably, following a golden crossover in early 2012, the 50-day moving average continues to read higher than the 200-day moving average, manifesting the bullish trend.

Founded in 1949, Apogee Enterprises Inc. is a leader in technologies for the design and development of value-added glass products, services and systems. The company’s larger Architectural segment is engaged in designing, engineering, fabricating, installing and renovating windows and walls of glass that make up the outside of the commercial buildings. The smaller Large-Scale Optical Technologies segment makes value-added glass and acrylic products for the custom framing market as well as optical thin film coatings for consumer electronic displays. Apogee, which has a market cap of roughly $549 million, markets its products directly as well as through independent distributors and retailers.

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