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Apogee (APOG) Q2 Earnings Top Estimates, Revenues In Line

Zacks Equity Research

Apogee Enterprises, Inc. APOG 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.

Apogee Enterprises, Inc. Price, Consensus and EPS Surprise

 

Apogee Enterprises, Inc. Price, Consensus and EPS Surprise

Apogee Enterprises, Inc. price-consensus-eps-surprise-chart | Apogee Enterprises, Inc. Quote

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 in the range of $3.00-$3.20 and capital expenditures in the band of $60-$65 million.

Price Performance

Shares of Apogee have fallen around 9.9% in the past year, compared with the industry’s decline of 33.8%.

Zacks Rank & Stocks to Consider

Apogee currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Albany International Corporation AIN, AGCO Corporation AGCO and UFP Technologies, Inc. UFPT. While Albany International sports a Zacks Rank #1 (Strong Buy), AGCO Corp and UFP Technologies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Albany International has an estimated earnings growth rate of 33.85% for 2019. The company’s shares have gained 11% over the past year.

AGCO Corp has a projected earnings growth rate of 31.11% for the current year. The stock has gained 27% in the past year.

UFP Technologies has an expected earnings growth rate of 8.10% for the ongoing year. The stock has appreciated 14% over the past year.

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