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Apogee Enterprises (APOG) Down 11.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Apogee Enterprises (APOG - Free Report) . Shares have lost about 11.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Apogee Enterprises due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Apogee Q2 Earnings Top Estimates, Revenues In Line

Apogee Enterprises delivered second-quarter fiscal 2020 (ended Aug 31, 2019) adjusted earnings per share of 72 cents, which beat the Zacks Consensus Estimate of 57 cents by a margin of 26%. However, the reported figure declined 3% from the prior-year quarter.

Including one-time items, the bottom line in the prior-year quarter stood at 72 cents. However, there were no such adjustments in the reported quarter.

Apogee reported revenues of $357 million which came in line with the Zacks Consensus Estimate. Reported revenues declined 1% from the prior-year quarter.

Operational Update

Cost of sales in the reported quarter was down 2.5% year over year to $271 million. Gross profit went up 2% year over year to $86 million. Gross margin came in at 24% compared with 23% in the year-ago quarter.

Selling, general and administrative (SG&A) expenses increased 5% year over year to $59 million. Adjusted operating income fell 6% year over year to $28 million. Operating margin in the second quarter was 7.7% compared with 8.1% in the prior-year quarter.

Segment Performance

In the fiscal second quarter, revenues in the Architectural Framing Systems segment declined 1.3% year over year to $187 million. The segment’s operating income fell 20% year over year to $15.5 million.

Revenues in the Architectural Glass Systems segment advanced 13% year over year to $99 million. Operating income came in at $6.5 million, a significant improvement from the $1.7 million reported in the prior-year quarter.

Revenues in the Architectural Services segment plunged 20% year over year to $62 million. The segment’s operating profit plummeted 48% year over year to $4 million.

Revenues in the Large-Scale Optical Technologies segment climbed 2% year over year to $20.8 million. Operating income improved 9% year over year to $4.6 million.

Backlog

The Architectural Framing Systems segment’s backlog fell to $388 million in the reported quarter compared with $407 million in the year-ago quarter. Backlog in the Architectural Services segment amounted to $502 million, up from $483 million in the prior-year quarter.

Financial Position

Apogee had cash and cash equivalents of $19 million at the end of the second quarter compared with $36 million at the end of the prior-year quarter. Cash flow from operating activities were $17.8 million in first-half 2020 compared with $47.9 million reported in the comparable prior-year period. Long-term debt was $117.4 million as of Aug 31, 2019 compared with $245.7 million as of Mar 2, 2019.

So far in fiscal 2020, Apogee returned $29.2 million of cash to shareholders through share repurchases and dividend payments.

Fiscal 2020 Guidance

Apogee reaffirmed guidance for fiscal 2020. The company expects revenue growth between 1% and 3%, with growth in three of the company’s segments. The upside is likely to be offset by decline in Architectural Services on account of execution schedules for backlog projects.

The company’s anticipates operating margin in the range of 8.2-8.6%. Improved margins in the Architectural Glass and Architectural Framing Systems segments will be somewhat offset by lower margins in the Architectural Services segment owing to reduced volumes and less favorable project maturity compared with fiscal 2019. Moreover, start-up costs related to the strategic growth investment in Architectural Glass, costs associated with supply chain initiatives, and higher corporate costs from higher legal expenses will also impact margins.

The company projects adjusted earnings per share at $3.00-$3.20 and capital expenditures in the band of $60-$65 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -14.12% due to these changes.

VGM Scores

At this time, Apogee Enterprises has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Apogee Enterprises has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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