Apogee (APOG) Tops Q4 Earnings Estimates, Misses On Revenues

Apogee Enterprises, Inc. (NASDAQ:APOG) reported earnings per share of 78 cents in fourth-quarter fiscal 2018 (ended Mar 3, 2018), down 3% from 80 cents per share recorded in the prior-year quarter. Adjusted earnings of 65 cents per share, however, beat the Zacks Consensus Estimate of 60 cents.

The company reported total revenues of around $353.5 million, up 13% year over year. However, revenues lagged the Zacks Consensus Estimate of $381 million.

Operational Update

Cost of sales in the quarter were up 15% year over year to $267.8 million. Gross profit grew 4% year over year to $85.7 million. Gross margin contracted 200 basis points (bps) to 24%. Selling, general and administrative (SG&A) expenses were up 10% year over year to $57.8 million. Operating income declined 6% year over year to $27.9 million. Operating margin shrunk 150 bps to 7.9%.

Segment Performance

Revenues at the Architectural Framing segment surged 51% year over year to $183.5 million, driven by the Sotawall and EFCO acquisitions. Excluding the acquisitions, revenues slipped 4%. The segment’s operating income in the quarter advanced 24% to $12.1 million from $9.7 million registered in the prior-year quarter.

The Architectural Glass Systems segment revenues were down 18% year over year to $92 million. The segment’s operating income plunged 70% to $4.1 million from $13.8 million reported in the year-earlier quarter.

Revenues at the Architectural Services segment were up 3% year over year to $67.7 million. The segment reported an operating profit of $6.3 million, significantly up from $4.2 million recorded in the comparable quarter last fiscal.

The Large-Scale Optical Technologies segment’s revenues dipped 11% year over year to $23.4 million. Operating income in the reported quarter came in at $7 million, up 2% year over year.

Backlog

The Architectural Framing Systems segment reported backlog of $405.7 million in the fiscal fourth quarter. The Architectural Services’ segment backlog came in at $426 million — an improvement of more than $100 million from the year-ago quarter.

Financial Position

Apogee had cash and cash equivalents of $19.4 million at the end of fiscal 2018 compared with $19.5 million as of the end of fiscal 2017. The company generated cash flow from operations of $127.3 million in fiscal 2018 compared with $124 million reported in fiscal 2017. Long-term debt was $215.9 million as of Mar 3, 2018, compared with $65.4 million as of Mar 4, 2017.

FY18 Performance

Apogee’s adjusted earnings were $3.10 per share for fiscal 2018, which beat the Zacks Consensus Estimate of $3.05. Including special items, earnings came in at $2.76 per share for the fiscal compared with $2.97 recorded a year ago.

Revenues for the fiscal increased 19% year over year to $1.3 billion from $1.1 billion in fiscal 2017 but fell short of the Zacks Consensus Estimate of $1.4 billion.

Fiscal 2019 View

For fiscal 2019, Apogee anticipates revenues to be up around 10% and operating margin to be 8.8-9.3%. The company expects its earnings per share for the fiscal to be in the range of $3.43-$3.63.

In fiscal 2019, Apogee will remain focused on operational improvement initiatives, which will drive revenues, along with operating margin improvement in fiscal 2020 and beyond. The company expects investment in geographic expansion, in architectural framing systems, and in architectural glass will boost revenues.

Share Price Performance

Apogee has underperformed the industry with respect to price performance over the past year. The stock has lost around 23.7%, while the industry incurred loss of 1.9% during the same time frame.

Zacks Rank & Key Picks

Apogee carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same sector include Allegion PLC (NYSE:ALLE) , Alarm.com Holdings, Inc. (NASDAQ:ALRM) and Ashtead Group (LON:AHT) PLC (OTC:ASHTY) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allegion has a long-term earnings growth rate of 12.3%. Its shares have gained 13.5%, over the past year.

Alarm.com has a long-term earnings growth rate of 15.6%. The company’s shares have rallied 25.3% during the same time frame.

Ashtead Group has a long-term earnings growth rate of 15%. The stock has appreciated 38.7% in a year’s time.

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