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Armstrong World (AWI) Surges 64.3% in 6 Months: Here's Why
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Armstrong World Industries, Inc. (AWI - Free Report) has been benefiting from an increase in average unit value (AUV) driven by favorable pricing and volumes. Contributions from recent acquisitions, digital initiatives and new product launches are encouraging.
Markedly, the company’s fourth-quarter 2023 results showcased solid contributions from the Mineral Fiber as well as Architectural Specialties segments despite soft market conditions. The growth was attributable to the increase in 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 (up 6.9% from the year-ago quarter) along with adjusted EBITDA margin expansion (rose 130 basis points year over year).
Shares of this Zacks Rank #1 (Strong Buy) company’s shares surged 64.3% in the past six months, outperforming the Zacks Building Products - Miscellaneous industry’s 41.4% growth, the Zacks Construction sector’s 36.1% increase and S&P 500 Index’s 17.2% rise.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company's 2024 earnings has risen to $5.74 per share from $5.52 in the past 60 days. The estimated figure depicts 7.9% growth from the prior year’s reported levels. AWI’s delivered a trailing four-quarter earnings surprise of 13.1%, on average.
The stock portrays a positive trend, indicating robust fundamentals and elevating the expectation of outperformance in the near term on the back of favorable AUV performance, lower input costs and growing demand patterns.
Let’s delve deeper into the factors that are in favor of AWI’s growth trend.
Factors Driving the Stock’s Growth
Acquisitions: Armstrong World follows a systematic inorganic strategy to enhance its portfolio. The company has acquired nine companies to expand its capabilities in the Architectural Specialties segment in the past seven years. In January 2024, the company solidified a strategic partnership with McKinstry, investing in Overcast Innovations (an early-stage McKinstry venture). This strategic move merges Armstrong World's industry-leading ceiling systems with Overcast’s pioneering modular designs, emphasizing crucial aspects like air quality, lighting, acoustics, and thermal comfort while optimizing energy and construction efficiency.
Digital Initiatives: Armstrong World harnesses digitalization initiatives and tech upgrades to drive growth. With ongoing investments in Healthy Spaces and digital endeavors, the company is poised for optimistic growth. Since 2022, the digital initiative of the company, Canopy, has portrayed quarter-on-quarter growth by creating new demand for its products. With its automated design service, Project Works, Armstrong World remains focused on making the project design process as efficient as possible for the benefit of architects, designers and contractors. The company is including more product portfolio in this tool. Also, it is now offering services to help architects and designers match their conceptual ideas of design with the best product solutions. During 2023, these initiatives, along with Project Works, helped drive the volume under the company’s Mineral Fiber segment by more than 1%, year over year. These also helped the company to mitigate some of the negative effects of the overall market weakness.
Focus on New Products: Armstrong World strategically invests in new products, sales, support, and advanced manufacturing, bolstering performance. Recent focus on metal, wood, and Tectum product development reinforces this strategy. The company’s Architectural Specialties segment has been leveraging the new product platforms that it has been acquiring over the past several years. This has enabled the company to create the scale and reach of Armstrong World to further penetrate the specialty ceiling and wall category.
In December 2023, Armstrong World announced acquiring the technology to integrate Phase Change Material or PCM into its ceiling tiles to improve their thermal mass and thereby reduce the energy consumption of commercial buildings by as much as 15%. Also, the addition of BOK Modern enhances its product mix further.
Superior ROE: Armstrong World’s superior return on equity (ROE) is also indicative of growth potential. The company’s ROE currently stands at 41.6%. This compares favorably with ROE of 13% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and Armstrong World’s ability to generate profit with minimum capital usage.
Other Key Picks
Some other top-ranked stocks in the same space are:
VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 26.9% in the past six months. The Zacks Consensus Estimate for VMC’s 2024 sales and earnings per share (EPS) indicates an improvement of 2.3% and 19.7%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have rallied 37.5% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank 1. NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 33.2% in the past six months.
The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.6% and 7.4%, respectively, from the prior-year levels.
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Armstrong World (AWI) Surges 64.3% in 6 Months: Here's Why
Armstrong World Industries, Inc. (AWI - Free Report) has been benefiting from an increase in average unit value (AUV) driven by favorable pricing and volumes. Contributions from recent acquisitions, digital initiatives and new product launches are encouraging.
Markedly, the company’s fourth-quarter 2023 results showcased solid contributions from the Mineral Fiber as well as Architectural Specialties segments despite soft market conditions. The growth was attributable to the increase in 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 (up 6.9% from the year-ago quarter) along with adjusted EBITDA margin expansion (rose 130 basis points year over year).
Shares of this Zacks Rank #1 (Strong Buy) company’s shares surged 64.3% in the past six months, outperforming the Zacks Building Products - Miscellaneous industry’s 41.4% growth, the Zacks Construction sector’s 36.1% increase and S&P 500 Index’s 17.2% rise.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company's 2024 earnings has risen to $5.74 per share from $5.52 in the past 60 days. The estimated figure depicts 7.9% growth from the prior year’s reported levels. AWI’s delivered a trailing four-quarter earnings surprise of 13.1%, on average.
The stock portrays a positive trend, indicating robust fundamentals and elevating the expectation of outperformance in the near term on the back of favorable AUV performance, lower input costs and growing demand patterns.
Let’s delve deeper into the factors that are in favor of AWI’s growth trend.
Factors Driving the Stock’s Growth
Acquisitions: Armstrong World follows a systematic inorganic strategy to enhance its portfolio. The company has acquired nine companies to expand its capabilities in the Architectural Specialties segment in the past seven years. In January 2024, the company solidified a strategic partnership with McKinstry, investing in Overcast Innovations (an early-stage McKinstry venture). This strategic move merges Armstrong World's industry-leading ceiling systems with Overcast’s pioneering modular designs, emphasizing crucial aspects like air quality, lighting, acoustics, and thermal comfort while optimizing energy and construction efficiency.
Digital Initiatives: Armstrong World harnesses digitalization initiatives and tech upgrades to drive growth. With ongoing investments in Healthy Spaces and digital endeavors, the company is poised for optimistic growth. Since 2022, the digital initiative of the company, Canopy, has portrayed quarter-on-quarter growth by creating new demand for its products. With its automated design service, Project Works, Armstrong World remains focused on making the project design process as efficient as possible for the benefit of architects, designers and contractors. The company is including more product portfolio in this tool. Also, it is now offering services to help architects and designers match their conceptual ideas of design with the best product solutions. During 2023, these initiatives, along with Project Works, helped drive the volume under the company’s Mineral Fiber segment by more than 1%, year over year. These also helped the company to mitigate some of the negative effects of the overall market weakness.
Focus on New Products: Armstrong World strategically invests in new products, sales, support, and advanced manufacturing, bolstering performance. Recent focus on metal, wood, and Tectum product development reinforces this strategy. The company’s Architectural Specialties segment has been leveraging the new product platforms that it has been acquiring over the past several years. This has enabled the company to create the scale and reach of Armstrong World to further penetrate the specialty ceiling and wall category.
In December 2023, Armstrong World announced acquiring the technology to integrate Phase Change Material or PCM into its ceiling tiles to improve their thermal mass and thereby reduce the energy consumption of commercial buildings by as much as 15%. Also, the addition of BOK Modern enhances its product mix further.
Superior ROE: Armstrong World’s superior return on equity (ROE) is also indicative of growth potential. The company’s ROE currently stands at 41.6%. This compares favorably with ROE of 13% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and Armstrong World’s ability to generate profit with minimum capital usage.
Other Key Picks
Some other top-ranked stocks in the same space are:
Vulcan Materials Company (VMC - Free Report) currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 26.9% in the past six months. The Zacks Consensus Estimate for VMC’s 2024 sales and earnings per share (EPS) indicates an improvement of 2.3% and 19.7%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have rallied 37.5% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank 1. NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 33.2% in the past six months.
The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.6% and 7.4%, respectively, from the prior-year levels.