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Armstrong World (AWI) Q4 Earnings & Revenues Beat Estimates

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Armstrong World Industries, Inc. (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.

Armstrong World Industries, Inc. Price, Consensus and EPS Surprise

 

Armstrong World Industries, Inc. Price, Consensus and EPS Surprise

Armstrong World Industries, Inc. price-consensus-eps-surprise-chart | Armstrong World Industries, Inc. Quote

Operational Update

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.

Financials

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.

2020 Highlights

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.

2021 Guidance

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 - Free Report) , Gibraltar Industries, Inc. (ROCK - Free Report) and TopBuild Corp. (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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