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Apogee (APOG) Bets on Order Trends & Pricing Amid High Costs

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Apogee Enterprises (APOG - Free Report) is well-poised to benefit from new project wins and a solid backlog in its Architectural Services segment. Expected benefits from its pricing actions, cost-reduction initiatives and procurement savings are likely to boost its bottom-line results despite the cost inflation. The company’s segments have the potential to increase market share, expand into new geographies and markets, and introduce new products that will sustain growth in the long term.

Architectural Services to Drive Results

Apogee’s margins and adjusted earnings per share have improved sequentially over the past two quarters, primarily led by continued strong performance in Architectural Services. The segment has been winning several new project awards and building its project pipeline, which will support growth. Meanwhile, the Large-Scale Optical segment has been witnessing improvement in demand since the pandemic-induced declines in fiscal 2021. The Framing Systems segment’s adjusted margins have improved by 40 basis points year over year through the last three quarters despite significant supply chain and inflation headwinds. This was courtesy of the company’s pricing actions, restructuring actions and relaunch of Lean to drive plant productivity. Backed by these efforts, the segment is anticipated to deliver margin improvement henceforth.

Segments Poised Well for the Long Haul

Backed by its strong projects pipeline and improving order trends, the company expects backlog growth in fiscal 2022 as well. This is likely to drive top and bottom lines for at least the next two years. The company’s segments have the potential to increase market share, expand into new geographies and markets, and introduce new products. Apogee is refocusing on the Architectural Glass segment to drive value. It is realigning Framing Systems to support its go-to-market approach and enhance its focus on target markets. This will reduce the overall cost structure of the segment. Apogee expects to improve margin in the Architectural Glass and Framing segments over the long term, driven by its restructuring actions.

Operational Improvement Efforts to Offset Cost Woes

The company anticipates inflationary pressures to persist in the fourth quarter and in the next fiscal year as well. Apart from this, it is bearing the brunt of supply-chain disruptions. Nevertheless, the company’s ongoing operational and commercial improvements, including cost reductions, integrated product management and pricing strategies, as well as supply chain and operational efficiencies, will help negate headwinds from cost inflation.

Price Performance

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Shares of Apogee have gained 31.3% in the past six months against the industry's decline of 16%.

Zacks Rank & Stocks to Consider

Apogee currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Titan International (TWI - Free Report) , AGCO Corporation (AGCO - Free Report) and Deere & Company (DE - Free Report) . While TWI flaunts a Zacks Rank #1 (Strong Buy), AGCO and DE carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Titan International has an expected earnings growth rate of 36.5% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 51% in the past 60 days.

TWI pulled off a trailing four-quarter earnings surprise of 47.6%, on average. TWI’s shares have soared 98% over the past six months.

AGCO Corp has an estimated earnings growth rate of 12.1% for 2022. In the past 60 days, the Zacks Consensus Estimate for the year’s earnings has been revised upward by 11%.

AGCO has a trailing four-quarter earnings surprise of 56.6%, on average. Over the past six months, the company’s shares have appreciated 14%.

Deere has a projected earnings growth rate of 19.7% for the current fiscal. The Zacks Consensus Estimate for fiscal 2022 earnings has moved north by 2.3% in the past 60 days.

Deere has a trailing four-quarter earnings surprise of 20.6%, on average. DE’s shares have climbed 23% in the past six months.