Apogee (APOG) Tops Q3 Earnings Estimates, Raises FY24 EPS View
Apogee Enterprises, Inc. APOG reported adjusted earnings per share (EPS) of $1.23 for third-quarter fiscal 2024 (ended Nov 25, 2023), surpassing the Zacks Consensus Estimate of earnings of $1.05. The bottom line increased 15% from the year-ago quarter. Gains from higher pricing and improved product mix offset the impacts of low volumes on its results.
Apogee generated revenues of $340 million in the quarter under review, down 8% from the year-ago quarter. This was mainly due to lower volumes, which was partially offset by improved mix and pricing. The top-line figure missed the consensus estimate of $361 million.
Operational Update
The cost of sales in the fiscal third quarter moved down 11.3% from the prior-year quarter to $249 million. The gross profit increased 5% from the prior-year quarter to $90.6 million. The gross margin expanded to 26.6% in the quarter under review from the prior-year quarter's 23.5%. The improvement was attributed to higher pricing, improved product mix, lower short-term incentive compensation expense and lower insurance-related expense, partially offset by the impacts of lower volume and a less favorable mix of projects in Services.
Apogee Enterprises, Inc. Price, Consensus and EPS Surprise
Apogee Enterprises, Inc. price-consensus-eps-surprise-chart | Apogee Enterprises, Inc. Quote
Selling, general and administrative expenses moved up 1.6% from the prior-year quarter to $52.7 million. The increase was due to higher salaries and benefits costs, partially offset by lower short-term incentive compensation expenses.
The operating income rose 8% from the year-earlier quarter to $37.6 million. The operating margin in the reported quarter was 11.1% compared with the prior-year quarter's 9.4%.
Segmental Performance
In the fiscal third quarter, revenues in the Architectural Framing Systems segment were down 15% from the year-ago quarter to $140 million. Lower volume due to weakening demand in the short-cycle business, partially offset by a more favorable sales mix led to the decline. We predicted the segment’s quarterly revenues to be $156 million. The segment's operating profit was $17 million, down from the year-ago quarter's $22 million mainly due to lower volume, which was partially offset by improved sales mix, the impact of cost savings initiatives, improved productivity and lower short-term incentive compensation expenses. Our prediction for the segment’s operating profit was $22.3 million.
Revenues in the Architectural Glass segment improved 12% from the prior-year quarter to $91 million. Gains from improved mix and pricing, reflecting the strategic shift to emphasize premium, high-performance products were partially offset by lower volume. Our prediction for the segment’s revenues was $93 million. The segment reported operating income of $15.2 million, up from $7.5 million in the third quarter of fiscal 2023 as improved mix and pricing was partially offset by the impact of lower volume and cost inflation. We predicted an adjusted operating income of $10.8 million for the quarter.
Revenues in the Architectural Services segment fell 7.2% from the prior-year quarter to $95 million, reflecting a less favorable mix of projects. Our model estimated the segment’s revenues to be $92.7 million. The segment's operating profit declined 12% from the prior-year quarter to $5.3 million due to a less favorable mix of projects, partially offset by lower short-term incentive compensation expense. We expected the operating profit to be $3.9 million.
Revenues in the Large-Scale Optical Technologies segment were down 2% from the year-ago quarter to $26 million on lower volume, partially offset by a more favorable mix and pricing. We projected revenues of $26.6 million for the quarter. The segment posted an operating profit of $7 million in the fiscal third quarter, flat compared with the prior-year quarter. Our estimate for the segment’s operating profit was $5.6 million.
Backlog
The Architectural Services segment's backlog was $777 million at the end of the third quarter of fiscal 2024 compared with $674 million at the end of the second quarter. The backlog in the Architectural Framing segment amounted to $184 million, down from $198 million at the end of the second quarter fiscal 2024.
Financial Position
Apogee had cash and cash equivalents of $23 million at the end of third quarter of fiscal 2024 compared with $20 million at the end of fiscal 2023. Cash provided by operating activities was $129 million in the nine-month period ended Nov 25, 2023, compared with the prior-year comparable period’s $51 million.
Long-term debt was $100.7 million at the end of the third quarter of fiscal 2024 compared with $169.8 million at the end of fiscal 2023.
Apogee returned $27.5 million in cash to its shareholders in fiscal 2024 so far through dividend payments and share repurchases.
FY24 Guidance
Apogee expects fiscal 2024 adjusted EPS between $4.55 and $4.70, up from the previously disclosed earnings of $4.35-$4.65. Compared with the adjusted EPS of $3.98 in fiscal 2023, the mid-point of the range suggests year-over-year growth of 16.2%.
The company anticipates a 3% year-over-year decline in revenues in fiscal 2024. Management projects capital expenditure between $40 million and $50 million for fiscal 2024.
Price Performance
Shares of Apogee have gained 21.7% in the past year against the industry's 5% decline.
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Zacks Rank & Stocks to Consider
Apogee currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Crane Company CR, Applied Industrial Technologies AIT and A. O. Smith Corporation AOS.
Each of these companies currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Crane Company’s 2023 EPS is pegged at $4.18. The consensus estimate for 2023 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 29.8%. CR shares have rallied 44% in a year.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 4% in the past 60 days. The company’s shares have gained 37% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 41% in the past year.
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