Armstrong World Industries, Inc. ( AWI Quick Quote AWI - Free Report) recently reported fourth-quarter 2020 results, wherein earnings and revenues beat the Zacks Consensus Estimate. However, the top and the bottom line declined on a year-over-year basis owing to coronavirus-hit market demand. Following the announcement, shares of the company dropped 6.4% in the after-hour trading session on Feb 23. Earnings & Revenue Discussion
Armstrong World reported adjusted earnings of 77 cents per share, beating the Zacks Consensus Estimate of 70 cents by 10%. However, the bottom line declined 30.6% from $1.11 per share reported in the year-ago quarter.
Net sales of $238.7 million beat the consensus mark of $231.5 million by 3.1%. However, the top line fell 3.3% year over year mainly due to lower volumes in both Mineral Fiber and Architectural Specialties segments, due to COVID-19-hit market demand. Also, unfavorable Mineral Fiber AUV due to regional weakness in major metropolitan areas impacted by COVID-19 added to the woes. However, this was partially offset by a positive sales impact of acquisitions made in 2019 and 2020.
Gross margin during the fourth quarter came in at 34.7%, which contracted 120 basis points from the year-ago period. Selling, general and administrative (SG&A) expenses, as a percentage of net sales, increased a whopping 660 bps year over year to 22.8%.
Adjusted EBITDA fell 18.9% from the prior-year quarter to $73 million, primarily attributed to unfavorable channel mix and drop in WAVE earnings. However, this was partially offset by improved manufacturing productivity.
Segmental Performance Mineral Fiber: The segment’s sales fell 7.2% on a year-over-year basis to $183.1 million due to lower volume and unfavorable AUV.
Operating income also decreased 23.9% from the prior-year quarter to $45 million, attributable to lower volumes, WAVE earnings and unfavorable AUV, partially offset by improved manufacturing productivity along with reduction in incentive compensation expenses. Adjusted EBITDA also declined 19.1% from the prior-year quarter to $66 million.
Architectural Specialties: Net sales in the segment grew 11.9% year over year to $55.6 million owing to sales from the recently-acquired Turf Design, Moz Designs and Arktura, LLC. However, this was offset by the pandemic-induced reduction in demand.
The segment’s operating income and adjusted EBITDA decreased 75% and 16% from the year-ago level, respectively, owing to lower sales volume as well as additional amortization expenses related to acquisitions.
As of Dec 31, 2020, Armstrong World had cash and cash equivalents of $136.9 million compared with $45.3 million at 2019-end. Net cash provided by operations during the fourth quarter came in at $70 million compared with $62 million in the prior-year period.
The company’s free cash flow (on an adjusted basis) came in at $68 million compared with $71 million in the year-ago quarter.
Net sales in 2020 came in at $936.9 million compared with $1,038.1 million in 2019, down 9.7%.
Total consolidated operating income in 2020 came in at $254.8 compared with $317.4 million in 2020.
Adjusted EBITDA in 2020 fell 18.1% to $330 million from $403 million in 2019.,
Adjusted free cash flow in 2020 fell 13% to $212 from $244 million in 2019.
Adjusted earnings per share in 2020 came in at $3.63 compared with $4.78 in 2019.
For 2021, the company expects operating income in the range of $264 million to $276 million. Meanwhile, adjusted net income is projected in the band of $189 million to $198 million. Adjusted EBITDA is anticipated in the range of $360 million to $372 million. Also, the company expects net sales growth between 10% and 13% for 2021.
The company expects adjusted diluted earnings per share in the range of $3.8 to $4 per share. Adjusted free cash flow is anticipated in the range of $185 million to $205 million.
Zacks Rank & Key Picks
Armstrong World currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Zacks
Building Products – Miscellaneous industry include Owens Corning ( OC Quick Quote OC - Free Report) , Gibraltar Industries, Inc. ( ROCK Quick Quote ROCK - Free Report) and TopBuild Corp. ( BLD Quick Quote BLD - Free Report) . Owens Corning carries a Zacks Rank #1 (Strong Buy), while Gibraltar Industries and TopBuild sport a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
Owens Corning’s 2021 earnings are expected to rise 18.8%.
Gibraltar’s 2021 earnings are expected to surge 26.3%.
TopBuild’s 2021 earnings are expected to increase of 21.9%.
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