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Apogee (APOG) Earnings & Revenues Miss Estimates in Q3
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Apogee Enterprises, Inc. (APOG - Free Report) reported earnings per share of 78 cents in third-quarter fiscal 2017 (ended Nov 26, 2016), up 24% from 63 cents per share in the prior-year quarter. Further, earnings fell short of the Zacks Consensus Estimate of 79 cents.
The company reported total revenues of $274 million, which grew 15% year over year. Moreover, revenues missed the Zacks Consensus Estimate of $277.5 million.
Apogee delivered another quarter of strong top and bottom-line growth, on the back of its architectural businesses. Results continue to be driven by its strategies to grow through new geographies, new products and new markets, along with focus on better project selection, productivity and operational improvements. This is reflected in Apogee’s share price performance year to date. It has outperformed the Zacks categorized Glass Products industry, with a year-to-date gain of 12.00% compared with the industry’s gain of 5.87%.
Cost of goods sold went up 14% year over year to $201 million. Gross profit improved 17% year over year to $72.9 million. Gross margin expanded 40 basis points (bps) to 26.6%. Selling, general and administrative (SG&A) expenses increased 15% year over year to $39.6 million. Operating income jumped 19% year over year to $33 million. Operating margin was up 40 bps year over year to 12.1%.
Segment Performance
Revenues at the Architectural Glass segment increased 25% year over year to $107 million. Operating income in the quarter surged 40% to $11.7 million from $8.4 million in the prior-year quarter.
Revenues at the Architectural Services segment rose 5% year over year to $64.4 million. The segment reported an operating profit of $4.9 million up 33% from $3.7 million in the year-ago quarter.
The Architectural Framing Systems segment’s revenues grew 19% year over year to $90.9 million led by volume growth along with improved pricing and mix. The segment’s operating income was up 28% to $11.8 million from $9.2 million in the prior-year quarter.
The Large-Scale Optical Technologies segment’s revenues declined 9% year over year to $22.1 million. Operating income in the reported quarter was $5.9 million, which fell 22% from $7.6 million in the year-ago quarter.
Financial Position
At the end of fiscal third-quarter, Apogee had cash and short-term investments of $97.1 million compared with $90.6 million as of fiscal 2016 end. The company generated cash flow from operations of $70.5 million for the nine-month period ended Nov 26, 2016 compared with $86.2 million in the year-ago period. During the third quarter, Apogee paid cash dividends of $3.6 million and repurchased 250,000 shares of common stock for $10.8 million to offset dilution from compensation programs.
Segment backlog at the Architectural Glass segment stood at $84.7 million in the third quarter, down from $90.7 million in second-quarter fiscal 2017. In the Architectural Framing Systems segment, backlog was $164.1 million, compared with $130.5 million in second-quarter fiscal 2017. Architectural Services’ segment backlog was $195.5 million, a dip from $236.1 million in second-quarter fiscal 2017.
Further, Apogee announced the acquisition of Sotawall Limited, a leading designer and fabricator of high-performance, unitized curtainwall systems for commercial construction projects in North America, for approximately $135 million. The buyout will expand Apogee’s geographic presence in Canada and the U.S., while adding unique curtainwall products to its offerings. The acquisition of this $100 million revenue business will add to its architectural framing systems segment and will also be accretive to Apogee’s earnings in fiscal 2018.
Apogee raised its earnings per share outlook for fiscal 2017 to $2.85–$2.95 from the previous guidance of $2.80–$2.90. The upbeat guidance came on the back of solid execution of strategies to improve operational performance, productivity and project selection. The company maintained its outlook for revenue growth of approximately 10% for fiscal 2017. However, this guidance does not include the impact of the Sotawall acquisition that will add approximately $15 million to fourth-quarter revenues at a break-even operating margin on account of purchase accounting costs.
The company anticipates delivering capital expenditures of approximately $70 million in fiscal 2017, as it is investing to enhance capabilities and productivity capacity. Gross margin is estimated to be approximately 26.7% and operating margin of approximately 11.5%.
Apogee expects mid-single digit U.S. commercial construction market growth in fiscal 2017 and 2018, as market activity, the Architecture Billings Index, office employment and office vacancy rates have witnessed positive momentum. With internal market visibility and external metrics showing positive signs, the company expects U.S. non-residential market to growth at least through fiscal 2020.
For the long term, the company believes to grow through expanding in new geographies, fresh products and markets along with robust backlog and bidding activity.
Apogee currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Alarm.Com Holdings, Inc. (ALRM - Free Report) , Worthington Industries, Inc. (WOR - Free Report) and Donaldson Company, Inc. (DCI - Free Report) .
Worthington Industries, which also carries a Zacks Rank #2, has an average positive earnings surprise of 6.25% in the last four quarters.
Donaldson, a Zacks Rank #2, has delivered a positive average earnings surprise of 3.23% in the last four quarters.
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Apogee (APOG) Earnings & Revenues Miss Estimates in Q3
Apogee Enterprises, Inc. (APOG - Free Report) reported earnings per share of 78 cents in third-quarter fiscal 2017 (ended Nov 26, 2016), up 24% from 63 cents per share in the prior-year quarter. Further, earnings fell short of the Zacks Consensus Estimate of 79 cents.
The company reported total revenues of $274 million, which grew 15% year over year. Moreover, revenues missed the Zacks Consensus Estimate of $277.5 million.
Apogee delivered another quarter of strong top and bottom-line growth, on the back of its architectural businesses. Results continue to be driven by its strategies to grow through new geographies, new products and new markets, along with focus on better project selection, productivity and operational improvements. This is reflected in Apogee’s share price performance year to date. It has outperformed the Zacks categorized Glass Products industry, with a year-to-date gain of 12.00% compared with the industry’s gain of 5.87%.
Cost of goods sold went up 14% year over year to $201 million. Gross profit improved 17% year over year to $72.9 million. Gross margin expanded 40 basis points (bps) to 26.6%. Selling, general and administrative (SG&A) expenses increased 15% year over year to $39.6 million. Operating income jumped 19% year over year to $33 million. Operating margin was up 40 bps year over year to 12.1%.
Segment Performance
Revenues at the Architectural Glass segment increased 25% year over year to $107 million. Operating income in the quarter surged 40% to $11.7 million from $8.4 million in the prior-year quarter.
Revenues at the Architectural Services segment rose 5% year over year to $64.4 million. The segment reported an operating profit of $4.9 million up 33% from $3.7 million in the year-ago quarter.
The Architectural Framing Systems segment’s revenues grew 19% year over year to $90.9 million led by volume growth along with improved pricing and mix. The segment’s operating income was up 28% to $11.8 million from $9.2 million in the prior-year quarter.
The Large-Scale Optical Technologies segment’s revenues declined 9% year over year to $22.1 million. Operating income in the reported quarter was $5.9 million, which fell 22% from $7.6 million in the year-ago quarter.
Financial Position
At the end of fiscal third-quarter, Apogee had cash and short-term investments of $97.1 million compared with $90.6 million as of fiscal 2016 end. The company generated cash flow from operations of $70.5 million for the nine-month period ended Nov 26, 2016 compared with $86.2 million in the year-ago period. During the third quarter, Apogee paid cash dividends of $3.6 million and repurchased 250,000 shares of common stock for $10.8 million to offset dilution from compensation programs.
Segment backlog at the Architectural Glass segment stood at $84.7 million in the third quarter, down from $90.7 million in second-quarter fiscal 2017. In the Architectural Framing Systems segment, backlog was $164.1 million, compared with $130.5 million in second-quarter fiscal 2017. Architectural Services’ segment backlog was $195.5 million, a dip from $236.1 million in second-quarter fiscal 2017.
Further, Apogee announced the acquisition of Sotawall Limited, a leading designer and fabricator of high-performance, unitized curtainwall systems for commercial construction projects in North America, for approximately $135 million. The buyout will expand Apogee’s geographic presence in Canada and the U.S., while adding unique curtainwall products to its offerings. The acquisition of this $100 million revenue business will add to its architectural framing systems segment and will also be accretive to Apogee’s earnings in fiscal 2018.
APOGEE ENTRPRS Price, Consensus and EPS Surprise
APOGEE ENTRPRS Price, Consensus and EPS Surprise | APOGEE ENTRPRS Quote
Outlook for Fiscal 2017 and Beyond
Apogee raised its earnings per share outlook for fiscal 2017 to $2.85–$2.95 from the previous guidance of $2.80–$2.90. The upbeat guidance came on the back of solid execution of strategies to improve operational performance, productivity and project selection. The company maintained its outlook for revenue growth of approximately 10% for fiscal 2017. However, this guidance does not include the impact of the Sotawall acquisition that will add approximately $15 million to fourth-quarter revenues at a break-even operating margin on account of purchase accounting costs.
The company anticipates delivering capital expenditures of approximately $70 million in fiscal 2017, as it is investing to enhance capabilities and productivity capacity. Gross margin is estimated to be approximately 26.7% and operating margin of approximately 11.5%.
Apogee expects mid-single digit U.S. commercial construction market growth in fiscal 2017 and 2018, as market activity, the Architecture Billings Index, office employment and office vacancy rates have witnessed positive momentum. With internal market visibility and external metrics showing positive signs, the company expects U.S. non-residential market to growth at least through fiscal 2020.
For the long term, the company believes to grow through expanding in new geographies, fresh products and markets along with robust backlog and bidding activity.
Apogee currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Alarm.Com Holdings, Inc. (ALRM - Free Report) , Worthington Industries, Inc. (WOR - Free Report) and Donaldson Company, Inc. (DCI - Free Report) .
Alarm.Com Holdings has an impressive track record of earnings surprises, with an average positive earnings surprise of 9.09% in the last four quarters and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Worthington Industries, which also carries a Zacks Rank #2, has an average positive earnings surprise of 6.25% in the last four quarters.
Donaldson, a Zacks Rank #2, has delivered a positive average earnings surprise of 3.23% in the last four quarters.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>