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Why Is Armstrong World Industries (AWI) Up 3.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Armstrong World Industries (AWI - Free Report) . Shares have added about 3.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Armstrong World Q4 Earnings & Revenues Beat
Armstrong World reported impressive results for fourth-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments, despite soft market conditions. The growth was attributable to the increase in average unit value (AUV), driven by favorable pricing and volumes. Also, contributions from recent acquisitions aided the uptrend. This was reflected in record-setting sales and adjusted EBITDA growth along with adjusted EBITDA margin expansion.
The company states to continue investing in its growth initiatives and support advancement on the back of its resilient business model.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.22 per share, which topped the Zacks Consensus Estimate of $1.03 by 18.5%. The metric also grew 13% year over year from earnings of $1.08 per share.
Net sales of $312.3 million surpassed the consensus mark of $307.9 million by 1.5% and grew 2.6% year over year. The upside was driven by strong AUV and high sales volume.
During the quarter, the company’s operating income of $66.3 million declined 6.1% from the year-ago quarter’s level of $70.6 million, primarily driven by higher incentive compensation, an increase in selling expenses and higher manufacturing costs. The reported value can be compared with our model’s projection of $63.9 million, or a 9.5% year-over-year decline. Operating margin contracted 200 basis points (bps) from the year-ago quarter to 21.2%. We expected the metric to be 20.8% compared with 23.2% reported in the prior year.
Adjusted EBITDA rose 6.9% from the year-ago quarter’s figure to $98 million. Adjusted EBITDA margin rose 130 bps from the year-ago quarter to 31.4%. Our estimate for adjusted EBITDA and adjusted EBITDA margin was $88.5 million and 28.8%, respectively.
Segmental Performance
Mineral Fiber: The segment’s net sales grew 2% on a year-over-year basis to $220.3 million on the back of $4 million of favorable AUV and $1 million of higher volumes. For this segment, we expected net sales to be $216 million, which implies flat year-over-year growth.
The segment reported an operating income of $60.9 million, down 0.3% from $61.1 million reported in the year-ago quarter. Operating margin declined 70 bps from the year-ago quarter’s levels to 27.6%. Adjusted EBITDA increased 3.5% from the year-ago quarter’s figure to $81 million. Adjusted EBITDA margin also rose 50 bps during the quarter to 36.8%.
Architectural Specialties: Net sales in the segment increased 4% year over year to $92 million, driven primarily by contributions from recent acquisitions and increased sales. Our estimate for this segment’s net sales was pegged at $91.7 million, which is 3.6% year-over-year growth.
The segment reported an operating income of $6 million, portraying a notable 43.9% year-over-year decline. Adjusted EBITDA increased 26.9% to $17 million from the year-ago quarter’s reported value of $13 million. On a year-over-year basis, the operating margin contracted 560 bps while the adjusted EBITDA margin expanded 330 bps.
2023 Highlights
In the full year, Armstrong World reported net sales of $1.3 billion, up 5% from $1.23 billion reported in 2022. Adjusted earnings during the year were $5.32 per share, up from $4.74 reported in 2022.
Operating income and operating margin increased 16.1% to $323.7 million and 240 bps to 25%, respectively, year over year. Adjusted EBITDA was also up 11.6% year over year to $430 million, with adjusted EBITDA margin of 33.2% (up 200 bps).
Financials
As of Dec 31, 2023, Armstrong World had cash and cash equivalents of $70.8 million compared with $106 million at 2022 end. Net cash provided by operations was $233.5 million in 2023 compared with $182.4 million in the year-ago period.
Adjusted free cash flow was $68 million in fourth-quarter 2023, down from $91 million reported in the year-ago quarter.
During the reported quarter, the company repurchased 0.4 million shares of common stock for $35 million, excluding commissions and taxes. As of Dec 31, 2023, $717 million shares were remaining under the current authorized share repurchase program.
2024 Guidance
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid fourth-quarter results and strong execution at the plants, operational efficiencies and cost-saving initiatives.
Armstrong World anticipates net sales to be within $1,335-$1,375 million, indicating a 3-6% increase from the year-ago figure.
Adjusted EBITDA is projected to be within $450-$470 million, suggesting a rise of 5-9% year over year. The company expects its adjusted earnings per share to be between $5.60 and $5.90, suggesting growth of 5-11% from the 2023 reported figure.
Adjusted free cash flow is anticipated to be between $275 million and $290 million, indicating a 5-10% increase year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Armstrong World Industries has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Armstrong World Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Armstrong World Industries belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, Owens Corning (OC - Free Report) , has gained 11.8% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Owens Corning reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +0.8%. EPS of $3.21 for the same period compares with $2.49 a year ago.
Owens Corning is expected to post earnings of $3.03 per share for the current quarter, representing a year-over-year change of +9.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.3%.
Owens Corning has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Armstrong World Industries (AWI) Up 3.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Armstrong World Industries (AWI - Free Report) . Shares have added about 3.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Armstrong World Q4 Earnings & Revenues Beat
Armstrong World reported impressive results for fourth-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments, despite soft market conditions. The growth was attributable to the increase in average unit value (AUV), driven by favorable pricing and volumes. Also, contributions from recent acquisitions aided the uptrend. This was reflected in record-setting sales and adjusted EBITDA growth along with adjusted EBITDA margin expansion.
The company states to continue investing in its growth initiatives and support advancement on the back of its resilient business model.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.22 per share, which topped the Zacks Consensus Estimate of $1.03 by 18.5%. The metric also grew 13% year over year from earnings of $1.08 per share.
Net sales of $312.3 million surpassed the consensus mark of $307.9 million by 1.5% and grew 2.6% year over year. The upside was driven by strong AUV and high sales volume.
During the quarter, the company’s operating income of $66.3 million declined 6.1% from the year-ago quarter’s level of $70.6 million, primarily driven by higher incentive compensation, an increase in selling expenses and higher manufacturing costs. The reported value can be compared with our model’s projection of $63.9 million, or a 9.5% year-over-year decline. Operating margin contracted 200 basis points (bps) from the year-ago quarter to 21.2%. We expected the metric to be 20.8% compared with 23.2% reported in the prior year.
Adjusted EBITDA rose 6.9% from the year-ago quarter’s figure to $98 million. Adjusted EBITDA margin rose 130 bps from the year-ago quarter to 31.4%. Our estimate for adjusted EBITDA and adjusted EBITDA margin was $88.5 million and 28.8%, respectively.
Segmental Performance
Mineral Fiber: The segment’s net sales grew 2% on a year-over-year basis to $220.3 million on the back of $4 million of favorable AUV and $1 million of higher volumes. For this segment, we expected net sales to be $216 million, which implies flat year-over-year growth.
The segment reported an operating income of $60.9 million, down 0.3% from $61.1 million reported in the year-ago quarter. Operating margin declined 70 bps from the year-ago quarter’s levels to 27.6%. Adjusted EBITDA increased 3.5% from the year-ago quarter’s figure to $81 million. Adjusted EBITDA margin also rose 50 bps during the quarter to 36.8%.
Architectural Specialties: Net sales in the segment increased 4% year over year to $92 million, driven primarily by contributions from recent acquisitions and increased sales. Our estimate for this segment’s net sales was pegged at $91.7 million, which is 3.6% year-over-year growth.
The segment reported an operating income of $6 million, portraying a notable 43.9% year-over-year decline. Adjusted EBITDA increased 26.9% to $17 million from the year-ago quarter’s reported value of $13 million. On a year-over-year basis, the operating margin contracted 560 bps while the adjusted EBITDA margin expanded 330 bps.
2023 Highlights
In the full year, Armstrong World reported net sales of $1.3 billion, up 5% from $1.23 billion reported in 2022. Adjusted earnings during the year were $5.32 per share, up from $4.74 reported in 2022.
Operating income and operating margin increased 16.1% to $323.7 million and 240 bps to 25%, respectively, year over year. Adjusted EBITDA was also up 11.6% year over year to $430 million, with adjusted EBITDA margin of 33.2% (up 200 bps).
Financials
As of Dec 31, 2023, Armstrong World had cash and cash equivalents of $70.8 million compared with $106 million at 2022 end. Net cash provided by operations was $233.5 million in 2023 compared with $182.4 million in the year-ago period.
Adjusted free cash flow was $68 million in fourth-quarter 2023, down from $91 million reported in the year-ago quarter.
During the reported quarter, the company repurchased 0.4 million shares of common stock for $35 million, excluding commissions and taxes. As of Dec 31, 2023, $717 million shares were remaining under the current authorized share repurchase program.
2024 Guidance
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid fourth-quarter results and strong execution at the plants, operational efficiencies and cost-saving initiatives.
Armstrong World anticipates net sales to be within $1,335-$1,375 million, indicating a 3-6% increase from the year-ago figure.
Adjusted EBITDA is projected to be within $450-$470 million, suggesting a rise of 5-9% year over year. The company expects its adjusted earnings per share to be between $5.60 and $5.90, suggesting growth of 5-11% from the 2023 reported figure.
Adjusted free cash flow is anticipated to be between $275 million and $290 million, indicating a 5-10% increase year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Armstrong World Industries has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Armstrong World Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Armstrong World Industries belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, Owens Corning (OC - Free Report) , has gained 11.8% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Owens Corning reported revenues of $2.3 billion in the last reported quarter, representing a year-over-year change of +0.8%. EPS of $3.21 for the same period compares with $2.49 a year ago.
Owens Corning is expected to post earnings of $3.03 per share for the current quarter, representing a year-over-year change of +9.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.3%.
Owens Corning has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.