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Apogee Bets on Momentum in Segments & Pricing Actions Amid High Costs
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Key Takeaways
Apogee's Architectural Services segment delivered growth and margin expansion into FY26.
APOG lifted FY26 guidance, projecting $1.40-$1.44B in revenues and EPS of $3.80-$4.20.
The $242M UW Solutions acquisition is set to add $100M sales in FY26 with a 20% EBITDA margin.
Apogee Enterprises, Inc. (APOG - Free Report) has been benefiting from the strong performance of its Architectural Services segment, which is gaining from improved pricing and product mix. The company's ongoing efforts to reduce costs and enhance productivity are expected to bolster margins in the coming quarters.
However, Apogee is exposed to headwinds, such as inflationary pressures and supply-chain issues. Elevated interest rates are another worry. The company is implementing Project Fortify to phase out lower-margin product and service offerings. This is predicted to have an impact on APOG's revenues.
Let us dig deeper into the factors that are impacting this stock.
Factors Aiding Apogee Stock
Solid Segmental Performances & Upbeat Outlook: Apogee’s Architectural Services segment witnessed year-over-year growth and margin expansion in fiscal 2025 despite significant supply-chain and inflation headwinds. The rise has continued in fiscal 2026. The segment is gaining on improved pricing and product mix, reflecting the company’s strategic shift toward more premium products.
Even though net sales in the Architectural Glass segment were down year over year in the past two quarters, the metric will likely benefit from an improved sales mix, productivity benefits from its Lean program and stronger pricing going forward. This bodes well for the company.
At the end of the first quarter of fiscal 2026, Apogee raised its guidance for net revenues to $1.40-$1.44 billion for fiscal 2026 from the prior stated $1.37-$1.43 billion. Its updated adjusted EPS guidance is $3.80-$4.20, up from the prior stated $3.55-$4.10. The company’s tariff mitigation efforts are expected to take effect in the second half of the fiscal year.
Impressive Strategic Actions: Following a detailed strategic review of its business, the company has embarked on a plan to deliver profitable growth and improved returns. The strategy is centered on three pillars, including becoming the economic leader in its target markets, actively managing the portfolio to drive higher margins and Return on Invested Capital (ROIC), and strengthening its core capabilities to enable profitable growth.
In 2022, it announced three-year financial goals, which include an ROIC greater than 12%, an operating margin greater than 10% and revenue growth greater than 1.2 times the growth of the non-residential construction market. Backed by these initiatives, Apogee delivered an adjusted ROIC of 14.9% in fiscal 2025, surpassing the company's goal.
Focus on Growth: Apogee continues to focus on strategy to diversify revenue streams, explore growth opportunities, and improve efficiency and productivity of operations to deliver stable growth and profitability. The company has initiated several operational and commercial improvements, including cost reductions, integrated product management and pricing strategies, as well as supply chain and operational efficiencies. These actions are likely to somewhat offset headwinds from cost inflation.
Apogee acquired UW Interco, LLC (UW Solutions) for $242 million in cash from Heartwood Partners in November 2024. This transaction is consistent with the company’s goal of adding distinctive businesses with a great operational track record to its portfolio. This deal expanded Apogee’s Performance Surfaces segment and will establish a scalable growth platform in the specialized coatings and materials market.
The transaction is estimated to generate roughly $100 million in sales in fiscal 2026, with an adjusted EBITDA margin of around 20%.
Near-Term Concerns for APOG
As part of its strategy to optimize its portfolio, the company is employing Project Fortify to move away from some lower-return product and service offerings. Under this initiative, it is shutting down its Toronto manufacturing site. This is expected to be a headwind for the top line in fiscal 2026.
Moreover, APOG has been incurring higher restructuring costs for Project Fortify, including $1.1 million in employee termination costs and $1.3 million in other expenses for fiscal 2025, with $0.2 million in termination cost reversals. In fiscal 2024, the project incurred $6.2 million in asset impairment charges, $5.9 million in employee termination costs and $0.3 million in other expenses.
APOG expects the UW Solutions business to contribute $100 million to net revenues in fiscal 2026. However, dilution related to the acquisition will negatively impact operating income. The company also expects an unfavorable impact of tariffs of 45-55 cents on its earnings per share. This is most likely to be reflected in the first half of fiscal 2026.
Apogee anticipates inflationary pressures to persist in fiscal 2026. Apart from this, the company is bearing the brunt of supply-chain disruptions. Labor constraints at some of its facilities remain a hindrance and might impact its production levels. Interest expenses and healthcare costs are also anticipated to be headwinds in the upcoming quarters.
Apogee’s Stock Price Performance
Shares of the company have lost 34.9% in the past year compared with the industry's decline of 14%.
The Zacks Consensus Estimate for Flowserve’s 2025 earnings is pegged at $3.34 per share, indicating a year-over-year increase of 27%. Flowserve’s shares have gained 14.5% in a year.
Life360 delivered an average trailing four-quarter earnings surprise of 487%. The Zacks Consensus Estimate for LIF’s 2025 earnings is pinned at 29 cents per share, which indicates a year-over-year upsurge of 583%. Life360’s shares have skyrocketed 137.8% in a year.
Crane Company delivered an average trailing four-quarter earnings surprise of 7.5%. The Zacks Consensus Estimate for CR’s 2025 earnings is pinned at $5.77 per share, which indicates year-over-year growth of 18.2%. The company’s shares have gained 25.8% in a year.
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Apogee Bets on Momentum in Segments & Pricing Actions Amid High Costs
Key Takeaways
Apogee Enterprises, Inc. (APOG - Free Report) has been benefiting from the strong performance of its Architectural Services segment, which is gaining from improved pricing and product mix. The company's ongoing efforts to reduce costs and enhance productivity are expected to bolster margins in the coming quarters.
However, Apogee is exposed to headwinds, such as inflationary pressures and supply-chain issues. Elevated interest rates are another worry. The company is implementing Project Fortify to phase out lower-margin product and service offerings. This is predicted to have an impact on APOG's revenues.
Let us dig deeper into the factors that are impacting this stock.
Factors Aiding Apogee Stock
Solid Segmental Performances & Upbeat Outlook: Apogee’s Architectural Services segment witnessed year-over-year growth and margin expansion in fiscal 2025 despite significant supply-chain and inflation headwinds. The rise has continued in fiscal 2026. The segment is gaining on improved pricing and product mix, reflecting the company’s strategic shift toward more premium products.
Even though net sales in the Architectural Glass segment were down year over year in the past two quarters, the metric will likely benefit from an improved sales mix, productivity benefits from its Lean program and stronger pricing going forward. This bodes well for the company.
At the end of the first quarter of fiscal 2026, Apogee raised its guidance for net revenues to $1.40-$1.44 billion for fiscal 2026 from the prior stated $1.37-$1.43 billion. Its updated adjusted EPS guidance is $3.80-$4.20, up from the prior stated $3.55-$4.10. The company’s tariff mitigation efforts are expected to take effect in the second half of the fiscal year.
Impressive Strategic Actions: Following a detailed strategic review of its business, the company has embarked on a plan to deliver profitable growth and improved returns. The strategy is centered on three pillars, including becoming the economic leader in its target markets, actively managing the portfolio to drive higher margins and Return on Invested Capital (ROIC), and strengthening its core capabilities to enable profitable growth.
In 2022, it announced three-year financial goals, which include an ROIC greater than 12%, an operating margin greater than 10% and revenue growth greater than 1.2 times the growth of the non-residential construction market. Backed by these initiatives, Apogee delivered an adjusted ROIC of 14.9% in fiscal 2025, surpassing the company's goal.
Focus on Growth: Apogee continues to focus on strategy to diversify revenue streams, explore growth opportunities, and improve efficiency and productivity of operations to deliver stable growth and profitability. The company has initiated several operational and commercial improvements, including cost reductions, integrated product management and pricing strategies, as well as supply chain and operational efficiencies. These actions are likely to somewhat offset headwinds from cost inflation.
Apogee acquired UW Interco, LLC (UW Solutions) for $242 million in cash from Heartwood Partners in November 2024. This transaction is consistent with the company’s goal of adding distinctive businesses with a great operational track record to its portfolio. This deal expanded Apogee’s Performance Surfaces segment and will establish a scalable growth platform in the specialized coatings and materials market.
The transaction is estimated to generate roughly $100 million in sales in fiscal 2026, with an adjusted EBITDA margin of around 20%.
Near-Term Concerns for APOG
As part of its strategy to optimize its portfolio, the company is employing Project Fortify to move away from some lower-return product and service offerings. Under this initiative, it is shutting down its Toronto manufacturing site. This is expected to be a headwind for the top line in fiscal 2026.
Moreover, APOG has been incurring higher restructuring costs for Project Fortify, including $1.1 million in employee termination costs and $1.3 million in other expenses for fiscal 2025, with $0.2 million in termination cost reversals. In fiscal 2024, the project incurred $6.2 million in asset impairment charges, $5.9 million in employee termination costs and $0.3 million in other expenses.
APOG expects the UW Solutions business to contribute $100 million to net revenues in fiscal 2026. However, dilution related to the acquisition will negatively impact operating income. The company also expects an unfavorable impact of tariffs of 45-55 cents on its earnings per share. This is most likely to be reflected in the first half of fiscal 2026.
Apogee anticipates inflationary pressures to persist in fiscal 2026. Apart from this, the company is bearing the brunt of supply-chain disruptions. Labor constraints at some of its facilities remain a hindrance and might impact its production levels. Interest expenses and healthcare costs are also anticipated to be headwinds in the upcoming quarters.
Apogee’s Stock Price Performance
Shares of the company have lost 34.9% in the past year compared with the industry's decline of 14%.
APOG’s Zacks Rank & Stocks to Consider
Apogee currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Flowserve Corporation (FLS - Free Report) , Life360, Inc. (LIF - Free Report) and Crane Company (CR - Free Report) . All these stocks have a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for Flowserve’s 2025 earnings is pegged at $3.34 per share, indicating a year-over-year increase of 27%. Flowserve’s shares have gained 14.5% in a year.
Life360 delivered an average trailing four-quarter earnings surprise of 487%. The Zacks Consensus Estimate for LIF’s 2025 earnings is pinned at 29 cents per share, which indicates a year-over-year upsurge of 583%. Life360’s shares have skyrocketed 137.8% in a year.
Crane Company delivered an average trailing four-quarter earnings surprise of 7.5%. The Zacks Consensus Estimate for CR’s 2025 earnings is pinned at $5.77 per share, which indicates year-over-year growth of 18.2%. The company’s shares have gained 25.8% in a year.