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Apogee Enterprises (APOG) Up 9.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Apogee Enterprises (APOG). Shares have added about 9.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Apogee Enterprises due for a pullback? 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 Q4 Earnings & Revenues Miss Estimates, Down Y/Y

Apogee has reported adjusted earnings per share of 85 cents in fourth-quarter fiscal 2019 (ended Mar 2, 2019), which declined 11.5% year over year. The reported figure also missed the Zacks Consensus Estimate of 91 cents.

Apogee generated revenues of $346 million, down 2% year over year. Also, the revenue figure missed the Zacks Consensus Estimate of $357 million.

Operational Update

Cost of sales in the reported quarter was up 13% year over year to $302 million. Gross profit slumped 48% year over year to $44 million. Gross margin came in at around 13% compared to 24% recorded in the year-ago quarter.

Selling, general and administrative (SG&A) expenses flared up 2% year over year to $59 million. Adjusted operating income declined 8.4% year over year to $31 million. Operating margin in the quarter was 9.0% compared with 9.6% in the prior year quarter.
 
Segment Performance

In the fiscal fourth quarter, the Architectural Framing Systems segment’s revenues went down 7% year over year to $170.6 million. The segment’s adjusted operating income plummeted 37% year over year to $9 million.

The Architectural Glass Systems segment’s revenues were up 13% year over year to $103.7 million. The segment’s adjusted operating income was up 3.3% year over year to $7.3 million.
 
Revenues in the Architectural Services segment was down 2% year over year to $66.3 million. The segment reported an operating profit of $9 million, reflecting a 44% year-over-year jump backed by the completion of large number of projects and lower costs.

The Large-Scale Optical Technologies segment’s revenues climbed 2% year over year to $24 million. Operating income in the reported quarter was up 3% year over year to $7.2 million.

Backlog

The Architectural Framing Systems segment’s backlog increased slightly to $408.5 million in the reported quarter compared with $407.9 million a year ago. The Architectural Services’ segment backlog came in at $444 million — an improvement from $426.3 million in the prior-year quarter.

Financial Position

Apogee had cash and cash equivalents of $29.2 million at the end of the fiscal fourth quarter compared with $19.3 million as of the end of the prior-year quarter. The company generated cash flow from operations of $96.4 million in fiscal 2019 compared with $127 million reported in fiscal 2018. Long-term debt was $245 million as of Mar 2, 2019, compared with $216 million as of Mar 3, 2018.

During the quarter under review, the company repurchased 657,983 shares for $20 million. In fiscal 2019, Apogee returned $61.2 million of cash to shareholders through share repurchases and dividend payments — a 22% increase from fiscal 2018.

FY19 Performance

Apogee’s adjusted earnings came in at $2.96 per share in fiscal 2019, which missed the Zacks Consensus Estimate of $3.07. Earnings declined 8% year-over-year. Including special items, earnings came in at $1.63 per share for the fiscal, down from the prior fiscal’s $2.76.

Revenues for the fiscal increased 5.8% year over year to $1.40 billion from $1.33 billion in fiscal 2018. The topline figure, however, lagged the Zacks Consensus Estimate of $1.41 billion.

Fiscal 2020 Guidance

For fiscal 2020, Apogee expects revenue growth to be between 1% and 3%, with growth in three of the company’s segments, partly offset by a decline in Architectural Services due to execution schedules for backlog projects.

Apogee anticipates operating margin of 8.2-8.6%, with margin improvement in Architectural Glass and Architectural Framing Systems. However, margins are expected to negatively impacted by start-up costs related to the strategic growth investment in Architectural Glass as well as increased corporate costs from higher legal expenses.

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

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -23.22% due to these changes.

VGM Scores

Currently, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Apogee Enterprises has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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