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High Architectural Sales to Aid Armstrong (AWI) Q4 Earnings

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Armstrong World Industries, Inc. AWI is scheduled to release fourth-quarter 2019 results on Feb 24, before the opening bell.

In the last reported quarter, the company’s earnings of $1.38 per share topped the Zacks Consensus Estimate by 6.2% but revenues of $277.1 million missed the consensus mark by 4.3%. On a year-over-year basis, earnings improved 20.1% and revenues advanced 6.4%.

Armstrong World — which shares space with Installed Building Products, Inc. IBP in the Zacks Building Products – Miscellaneous industry — reported better-than-expected earnings in three of the last four quarters, with the average positive surprise being 6.2%.

Trend in Estimate Revision

The Zacks Consensus Estimate for earnings per share for the quarter to be reported has been unchanged over the past 60 days at 85 cents. Nonetheless, this indicates an increase of 6.3% from the year-ago quarter. The consensus estimate for revenues is pegged at $255.7 million, suggesting 7.1% year-over-year growth.

Factors to Note

The company is expected to have registered higher earnings and revenues in the fourth quarter on the back of volume gains in Architectural Specialties, AUV expansion in Mineral Fiber, and acquisitions.

However, volumes in the Mineral Fiber segment (accounting for 78.9% of revenues) have been soft over the last few quarters due to weakness in Latin America, its Big Box channel, and weather-related challenges in the upper Midwest and parts of Canada. Although the segment’s volume improved during the third quarter, the same remained soft in Canada and the big box channels. This trend is likely to have continued in the fourth quarter. Political and economic issues in Canada, and inventory balancing in the big box channels may have been other concerns. R&R activity in the U.S. retail and healthcare verticals has been softer and uneven across the regions served. These impediments are likely to get reflected on the segment’s performance in the fourth quarter.

The Zacks Consensus Estimate for Mineral Fiber segment sales is pegged at $198 million, suggesting an increase of 3.7% from a year ago but a 9.6% sequential decrease.

Increased market penetration, and acquisitions of Architectural Components Group, Plasterform and Steel Ceilings are likely to have benefited the Architectural Specialties segment. For the segment, the consensus estimate for sales is pegged $58 million, which implies 20.8% year-over-year growth but a sequential decline of 1.7%.

Quantitative Model Prediction

Our proven model does not conclusively predict an earnings beat for Armstrong World this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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