It has been about a month since the last earnings report for Armstrong World Industries (AWI Quick QuoteAWI - Free Report) . Shares have added about 2.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Armstrong World Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Armstrong World Q4 Earnings & Sales Top

Armstrong World Industries, Inc. reported solid results for fourth-quarter 2021. Both the top and bottom lines surpassed the Zacks Consensus Estimate and grew on a year-over-year basis. The improvement stemmed from a favorable Average Unit Value (“AUV”) and benefits from the acquisitions of Turf, Moz, and Arktura in 2020 (“2020 Acquisitions”).

Yet, Armstrong World noted that the resurgence of the pandemic in certain markets and the global supply chain and labor disruptions resulted in extended project timelines.

Vic Grizzle, president and CEO of Armstrong, said, “These results were driven by effective execution through an uneven market recovery and the continued strength of our total value proposition. These hallmarks of our company support our ability to more than offset inflationary pressures with our pricing strategies while maintaining investments in longer-term growth opportunities. The investments we've made throughout the pandemic in people, capabilities, new product development and our digital and Healthy Spaces initiatives, give us confidence in our growth outlook for 2022 and beyond.”

Earnings & Revenue Discussion

Armstrong World reported adjusted earnings of $1.09 per share, beating the Zacks Consensus Estimate of $1.06 by 2.8%. The bottom line rose 34.6% from 81 cents per share reported in the year-ago quarter.

Net sales of $282.5 million surpassed the consensus mark of $275 million by 2.7% and grew 18.3% year over year. AUV of $23 million and incremental sales from 2020 Acquisitions of $14 million supported the top-line growth.

Operational Update

During the quarter, the company’s operating income of $55.5 million improved 25.9% from the previous-year quarter’s $34.8 million. The upside was primarily driven by positive AUV in the Mineral Fiber segment, the absence of charitable contribution to the Armstrong World Industries Foundation, benefits from 2020 Acquisitions and favorable WAVE equity earnings.

Adjusted EBITDA also rose 20.6% from the prior-year quarter to $88 million.

Segmental Performance

Mineral Fiber: The segment’s sales increased 13.2% on a year-over-year basis to $207.2 million. It is mainly attributable to 1% higher sales volumes and a 12% increase in AUV. Operating income rose 33.3% from the prior-year quarter to $60 million. Adjusted EBITDA also increased 16.6% from the prior-year quarter to $77 million.

Architectural Specialties: Net sales in the segment grew 35.4% year over year to $75.3 million owing to solid 2020 Acquisitions and higher organic sales volumes. The segment reported an operating loss of $3.3 million versus operating income of $1.4 million registered a year ago. This downside was mainly driven by a $12 million increase in expenses related to 2020 Acquisitions. Adjusted EBITDA came in at $11 million, up 58.3% from the prior-year quarter.

Financials

As of Dec 31, 2021, Armstrong World had cash and cash equivalents of $98.1 million compared with $136.9 million at 2020-end. Net cash provided by operations was $187.2 million during 2021 compared with $218.8 million in the prior-year period.

In the fourth quarter, the company’s free cash flow (adjusted basis) came in at $45 million, down from $68 million in the year-ago period.

2021 Highlights

Net sales for the year came in at $1.1 billion, up 18.1% from $936.9 million in 2020. Adjusted earnings per share for 2021 totaled $4.36 compared with $3.74 in the prior year. The top and bottom lines topped the consensus mark by 0.6% and 1.4%, respectively.

Total consolidated operating income came in at $260, up 2% from $254.8 million in 2020. Adjusted EBITDA rose 12.6% to $372 million from $330 million in 2020.

2022 Guidance

AWI anticipates 2022 net sales of $1,215-$1,255 million, indicating a 10-13% increase from a year ago. For 2022, the company expects adjusted EBITDA within $410-$430 million, suggesting a rise of 10-16% year over year. AWI expects adjusted earnings per share in the range of $5-$5.20, indicating growth of 15-19% from 2021. Adjusted free cash flow is anticipated in the range of $215-$235 million (implying a 13-24% increase from the prior year).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -5.63% due to these changes.

VGM Scores

At this time, Armstrong World Industries has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Armstrong World Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.