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Armstrong World (AWI) Q4 Earnings & Sales Top, Stock Down

·5 min read

Armstrong World Industries, Inc. AWI reported solid results for fourth-quarter 2021. Both the top and bottom lines surpassed the Zacks Consensus Estimate and grew on a year-over-year basis. The improvement stemmed from a favorable Average Unit Value (“AUV”) and benefits from the acquisitions of Turf, Moz, and Arktura in 2020 (“2020 Acquisitions”).

Yet, Armstrong World noted that the resurgence of the pandemic in certain markets and the global supply chain and labor disruptions resulted in extended project timelines. Shares of the company slid 2.6% on Feb 22.

Vic Grizzle, president and CEO of Armstrong, said, “These results were driven by effective execution through an uneven market recovery and the continued strength of our total value proposition. These hallmarks of our company support our ability to more than offset inflationary pressures with our pricing strategies while maintaining investments in longer-term growth opportunities. The investments we've made throughout the pandemic in people, capabilities, new product development and our digital and Healthy Spaces initiatives, give us confidence in our growth outlook for 2022 and beyond.”

Earnings & Revenue Discussion

Armstrong World reported adjusted earnings of $1.09 per share, beating the Zacks Consensus Estimate of $1.06 by 2.8%. The bottom line rose 34.6% from 81 cents per share reported in the year-ago quarter.

Armstrong World Industries, Inc. Price, Consensus and EPS Surprise

Armstrong World Industries, Inc. Price, Consensus and EPS Surprise
Armstrong World Industries, Inc. Price, Consensus and EPS Surprise

Armstrong World Industries, Inc. price-consensus-eps-surprise-chart | Armstrong World Industries, Inc. Quote

Net sales of $282.5 million surpassed the consensus mark of $275 million by 2.7% and grew 18.3% year over year. AUV of $23 million and incremental sales from 2020 Acquisitions of $14 million supported the top-line growth.

Operational Update

During the quarter, the company’s operating income of $55.5 million improved 25.9% from the previous-year quarter’s $34.8 million. The upside was primarily driven by positive AUV in the Mineral Fiber segment, the absence of charitable contribution to the Armstrong World Industries Foundation, benefits from 2020 Acquisitions and favorable WAVE equity earnings.

Adjusted EBITDA also rose 20.6% from the prior-year quarter to $88 million.

Segmental Performance

Mineral Fiber: The segment’s sales increased 13.2% on a year-over-year basis to $207.2 million. It is mainly attributable to 1% higher sales volumes and a 12% increase in AUV. Operating income rose 33.3% from the prior-year quarter to $60 million. Adjusted EBITDA also increased 16.6% from the prior-year quarter to $77 million.

Architectural Specialties: Net sales in the segment grew 35.4% year over year to $75.3 million owing to solid 2020 Acquisitions and higher organic sales volumes. The segment reported an operating loss of $3.3 million versus operating income of $1.4 million registered a year ago. This downside was mainly driven by a $12 million increase in expenses related to 2020 Acquisitions. Adjusted EBITDA came in at $11 million, up 58.3% from the prior-year quarter.

Financials

As of Dec 31, 2021, Armstrong World had cash and cash equivalents of $98.1 million compared with $136.9 million at 2020-end. Net cash provided by operations was $187.2 million during 2021 compared with $218.8 million in the prior-year period.

In the fourth-quarter 2021, the company’s free cash flow (adjusted basis) came in at $45 million, down from $68 million in the year-ago period.

2021 Highlights

Net sales for the year came in at $1.1 billion, up 18.1% from $936.9 million in 2020. Adjusted earnings per share for 2021 totaled $4.36 compared with $3.74 in the prior year. The top and bottom lines topped the consensus mark by 0.6% and 1.4%, respectively.

Total consolidated operating income came in at $260 million, up 2% from $254.8 million in 2020. Adjusted EBITDA rose 12.6% to $372 million from $330 million in 2020.

2022 Guidance

AWI anticipates 2022 net sales of $1,215-$1,255 million, indicating a 10-13% increase from a year ago. For 2022, the company expects adjusted EBITDA within $410-$430 million, suggesting a rise of 10-16% year over year. AWI expects adjusted earnings per share in the range of $5-$5.20, indicating growth of 15-19% from 2021. Adjusted free cash flow is anticipated in the range of $215-$235 million (implying a 13-24% increase from the prior year).

Zacks Rank & Peer Releases

Armstrong World currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens Corning OC reported solid results for fourth-quarter 2021, wherein earnings and net sales surpassed their respective Zacks Consensus Estimate as well as improved on a year-over-year basis.

Owens Corning’s solid quarterly results were backed by strong demand across the markets served and commercial and operational execution, despite supply chain disruptions and inflation.

Masco Corporation MAS reported lackluster earnings for fourth-quarter 2021. The bottom line not only lagged the Zacks Consensus Estimate but also declined on a year-over-year basis due to supply-chain challenges and inflation headwinds.

Nonetheless, Masco’s net sales surpassed the consensus mark and improved from the prior-year level on strong demand.

Otis Worldwide Corporation OTIS reported strong earnings for fourth-quarter 2021. Its earnings surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.

Otis’ sales improved from the year-ago figure but lagged the consensus mark marginally.


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