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Apogee (APOG) to Benefit from Acquisitions, Backlog Growth

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On Jun 29, we issued an updated research report on Apogee Enterprises, Inc. APOG. The company is poised to benefit from acquisitions, improving architectural market, and growth in backlog and bidding activity. Focus on operational improvements, as well as expansion in new geographies and markets also remain tailwinds.

In the first-quarter conference call, Apogee updated its earnings per share guidance to $3.65–$3.85. The company also lifted its revenue growth outlook to 26–28%. The raised guidance is backed by internal market visibility from backlog, commitments and bidding activity, and positive external metrics, including forecasts for mid-single digit U.S. commercial construction market growth in 2017.

Apogee remains active on the acquisition front. Over the last six months, Apogee acquired two companies – Sotawall and EFCO. Sotawall will contribute to Apogee’s revenue and margin growth in commercial construction markets. Furthermore, the EFCO acquisition will help in expanding Apogee's presence in the midsized commercial buildings, broaden its product offerings and enhance its geographic presence across the U.S.

The EFCO acquisition will also aid to capture $10–$15 million in annual synergies, by fiscal 2020. Moreover, with the addition of EFCO and Sotawall, Apogee will be able to add approximately $1.4 billion in revenues in fiscal 2018.

Notably, Apogee remains focused on better positioning itself over a cycle, including growing its share of mid-size projects in architectural glass, expanding its geographic presence and product offerings. Thus, the company’s efforts on productivity improvement, cost control and improvements in volume, mix, project margins and operating leverage will aid margin expansion.

In addition, Apogee continues to expect mid-single digit U.S. commercial construction market growth in fiscal 2018, as market activity, the Architecture Billings Index (ABI), office employment indicate a positive momentum. The ABI reported a score of 52.6 for Jun 2017, the fifth straight month that the index has remained positive.

Moreover, Apogee has outperformed the Zacks classified Glass Products sub-industry with respect to price performance over the past two years. The stock gained around 6.2%, while the industry recorded growth of 3.3% over the same time frame.

Apogee currently sports a Zacks Rank #1 (Strong Buy).

Other similarly-ranked stocks in the sector include AGCO Corporation AGCO, Colfax Corporation (CFX - Free Report) and Deere & Company DE. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has an average positive earnings surprise of 40.39% for the trailing four quarters.

Colfax generated an average positive earnings surprise of 9.45% over the past four quarters.

Deere has a remarkable average positive earnings surprise of 70.41% for the last four quarters.

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