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Apogee (APOG) Banks on Strong Order Activity & Acquisitions

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On Jul 4, we issued an updated research report on Apogee Enterprises, Inc. (APOG - Free Report) . The company is poised to gain from strong order activity, positive outlook for commercial construction markets and lower tax rates. Its focus on the integration of EFCO and Sotawall acquisitions is also encouraging.

Let’s illustrate these growth factors in detail.

Apogee to Grow on Strong Order Activity

Backed by solid backlog growth and order activity as well the momentum in the North American construction industry, the company raised its operating margin guidance to 8.9-9.4% for fiscal 2019.

Positive Outlook for Commercial Construction Markets

For fiscal 2019, Apogee expects its earnings per share to be in the $3.48-$3.68 range and revenue growth of around 10%. This outlook is supported by external forecasts for continued U.S. commercial construction growth. The company believes that the North American commercial construction markets will grow throughout fiscal 2020. This is because market activity continues to reflect solid growth in all U.S. regions and sectors, in particular, office and institutional building segments. Furthermore, office employment and office vacancy rates, and job growth exhibit a positive momentum that reflects a favorable trend in the non-residential construction market.

Lower Tax Rates to Boost Earnings

Apogee will gain from lower tax rate as it maintained tax rate guidance of approximately 24% for fiscal 2019 compared with around 33% in fiscal 2018, reflecting benefits from the Tax Cuts and Jobs Act in the United States.

EFCO and Sotawall Acquisitions — A Growth Strategy

Apogee is primarily focusing on the integration of EFCO to recognize margin opportunities. Also, the company is moving forward with synergy goals by leveraging supplier relationships and driving on-time delivery. It has ordered machining automation equipment and approved a plant improvement project to drive significant operational efficiency, beginning early in fiscal 2020. The company remains optimistic about long-term prospects for this business. Further, Apogee expects strong award activity from the Sotawall acquisition, which bodes well for fiscal 2019 and beyond.

Share Price Performance

Apogee has outperformed its industry with respect to price performance year to date. The stock has gained around 5% against the industry’s 17% decline.

Zacks Rank & Other Stocks to Consider

Apogee carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same sector are Actuant Corporation (ATU - Free Report) , DMC Global Inc. (BOOM - Free Report) and Chart Industries, Inc. (GTLS - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Actuant has a long-term earnings growth rate of 15.6%. Its shares have rallied 15% year to date.

DMC Global has a long-term earnings growth rate of 20%. The company’s shares have surged 80% year to date.

Chart Industries has a long-term earnings growth rate of 26.9%. The stock has gained 36% so far this year.

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