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Apogee Q2 to Benefit from Tax Credit & Architectural Market

Zacks Equity Research

Shares of Apogee Enterprises, Inc. (APOG) went up 0.34% after the company announced that its second-quarter fiscal 2015 (ended Aug 30) results will benefit from a tax credit of approximately $6 million (20 cents per share). The benefit under Section 48C of the Internal Revenue Code is related to the successful startup and commercial production of coatings on Apogee’s new $30 million architectural glass coater earlier this month.

The tax credit was started in 2010 by the IRS in cooperation with the Department of Energy as part of the American Reinvestment and Recovery Act and as an incentive for energy-efficiency investments throughout the United States. Apogee’s new coater will produce coating products with higher levels of energy efficiency for commercial buildings.

Apogee invested in the new state-of-the-art coater with an aim to reap dividends as it is expected provide a competitive edge to the company when architectural markets improve. The coater will enable Apogee’s architectural glass business to cater to the needs of advanced energy-efficient and aesthetic coatings for landmark buildings around the world.

In the second quarter, Apogee is witnessing significantly strong growth in its architectural market than previously expected. As customer lead times are extending across the industry triggered by a sustained growth trend for commercial construction, the company is incurring higher costs in the quarter as it ramps up to meet immediate customer demand. Apogee is also evaluating options to enhance architectural glass capacity in the near term.

Given the current market strength, Apogee expects strong backlog growth and is maintaining its full-year guidance. For fiscal 2015, Apogee expects revenue growth in the range of 15% to 20% and earnings in the range of $1.40 to $1.50 per share. Apogee now expects a 20 cents per share tax credit impact.

The company is slated to release its second-quarter results after the market closes on Sep 16. The Zacks Consensus Estimate for the quarter is at 27 cents, reflecting a 28.6% year-over-year growth, and for fiscal 2015 is at $1.45, a 52.6% annual growth.

Apogee will benefit from its strategy of international growth and new product introductions. Apogee’s strong backlog bodes well for its future performance. Moreover, the company intends to add new capacities and fund acquisitions. Focus on operational improvements, expansion into new geographies and markets as well as product launches will drive Apogee’s revenue growth going forward.

Apogee Enterprises is a leader in technologies for the design and development of value-added glass products, services and systems. Apogee currently carries a Zacks Rank #3 (Hold).

Some better ranked stocks that are worth considering in this sector include Blount International Inc. (BLT), DXP Enterprises, Inc. (DXPE) and IDEX Corporation (IEX). While Blount International sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and IDEX Corporation carry a Zacks Rank #2 (Buy).

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