Armstrong World (AWI) Q4 Earnings & Revenues Beat, Stock Up
Armstrong World Industries, Inc. AWI reported impressive results for fourth-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments, despite soft market conditions. The growth was attributable to the increase in average unit value (AUV), driven by favorable pricing and volumes. Also, contributions from recent acquisitions aided the uptrend. This was reflected in record-setting sales and adjusted EBITDA growth along with adjusted EBITDA margin expansion.
The company states to continue investing in its growth initiatives and support advancement on the back of its resilient business model.
Following the results, shares of this international designer and manufacturer of wall and ceiling building materials notably gained 11.8% during the trading hours on Feb 20.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.22 per share, which topped the Zacks Consensus Estimate of $1.03 by 18.5%. The metric also grew 13% year over year from earnings of $1.08 per share.
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 $312.3 million surpassed the consensus mark of $307.9 million by 1.5% and grew 2.6% year over year. The upside was driven by strong AUV and high sales volume.
During the quarter, the company’s operating income of $66.3 million declined 6.1% from the year-ago quarter’s level of $70.6 million, primarily driven by higher incentive compensation, an increase in selling expenses and higher manufacturing costs. The reported value can be compared with our model’s projection of $63.9 million, or a 9.5% year-over-year decline. Operating margin contracted 200 basis points (bps) from the year-ago quarter to 21.2%. We expected the metric to be 20.8% compared with 23.2% reported in the prior year.
Adjusted EBITDA rose 6.9% from the year-ago quarter’s figure to $98 million. Adjusted EBITDA margin rose 130 bps from the year-ago quarter to 31.4%. Our estimate for adjusted EBITDA and adjusted EBITDA margin was $88.5 million and 28.8%, respectively.
Segmental Performance
Mineral Fiber: The segment’s net sales grew 2% on a year-over-year basis to $220.3 million on the back of $4 million of favorable AUV and $1 million of higher volumes. For this segment, we expected net sales to be $216 million, which implies flat year-over-year growth.
The segment reported an operating income of $60.9 million, down 0.3% from $61.1 million reported in the year-ago quarter. Operating margin declined 70 bps from the year-ago quarter’s levels to 27.6%. Adjusted EBITDA increased 3.5% from the year-ago quarter’s figure to $81 million. Adjusted EBITDA margin also rose 50 bps during the quarter to 36.8%.
Architectural Specialties: Net sales in the segment increased 4% year over year to $92 million, driven primarily by contributions from recent acquisitions and increased sales. Our estimate for this segment’s net sales was pegged at $91.7 million, which is 3.6% year-over-year growth.
The segment reported an operating income of $6 million, portraying a notable 43.9% year-over-year decline. Adjusted EBITDA increased 26.9% to $17 million from the year-ago quarter’s reported value of $13 million. On a year-over-year basis, the operating margin contracted 560 bps while the adjusted EBITDA margin expanded 330 bps.
2023 Highlights
In the full year, Armstrong World reported net sales of $1.3 billion, up 5% from $1.23 billion reported in 2022. Adjusted earnings during the year were $5.32 per share, up from $4.74 reported in 2022.
Operating income and operating margin increased 16.1% to $323.7 million and 240 bps to 25%, respectively, year over year. Adjusted EBITDA was also up 11.6% year over year to $430 million, with adjusted EBITDA margin of 33.2% (up 200 bps).
Financials
As of Dec 31, 2023, Armstrong World had cash and cash equivalents of $70.8 million compared with $106 million at 2022 end. Net cash provided by operations was $233.5 million in 2023 compared with $182.4 million in the year-ago period.
Adjusted free cash flow was $68 million in fourth-quarter 2023, down from $91 million reported in the year-ago quarter.
During the reported quarter, the company repurchased 0.4 million shares of common stock for $35 million, excluding commissions and taxes. As of Dec 31, 2023, $717 million shares were remaining under the current authorized share repurchase program.
2024 Guidance
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid fourth-quarter results and strong execution at the plants, operational efficiencies and cost-saving initiatives.
Armstrong World anticipates net sales to be within $1,335-$1,375 million, indicating a 3-6% increase from the year-ago figure.
Adjusted EBITDA is projected to be within $450-$470 million, suggesting a rise of 5-9% year over year. The company expects its adjusted earnings per share to be between $5.60 and $5.90, suggesting growth of 5-11% from the 2023 reported figure.
Adjusted free cash flow is anticipated to be between $275 million and $290 million, indicating a 5-10% increase year over year.
Zacks Rank
Armstrong World currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Construction Releases
Vulcan Materials Company VMC reported strong results for fourth-quarter 2023, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate. On a year-over-year basis, both metrics increased year over year.
This performance can be attributed to the consistent strategic execution and the strong performance of its aggregates-led business. Additionally, large industrial projects contributed to its better-than-expected results. For 2024, the company anticipates adjusted EBITDA in the range of $2.15-$2.30 billion and net earnings of $1.07-$1.19 billion. The company expects to have capital expenditures between $625 million and $675 million for maintenance and growth projects.
Martin Marietta Materials, Inc. MLM reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. Revenues missed the consensus mark but rose year over year.
Going forward, MLM anticipates strong demand for infrastructure, large-scale energy and domestic manufacturing projects. This will largely offset weaker residential demand and the anticipated softening in light non-residential activity. With mortgage rates stabilizing and affordability headwinds receding, MLM fully expects single-family residential construction to recover as demand still exceeds supply, particularly in its key markets. For 2024, it expects consolidated products and services revenues of $6.75-$7.19 billion. Also, adjusted EBITDA is projected to be between $2.14 billion and $2.34 billion.
Owens Corning OC reported better-than-expected results for fourth-quarter 2023. Both earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
The Roofing segment’s contributions, favorable price and cost mix, and manufacturing performance aided the uptrend. The Roofing segment’s net sales rose 16% year over year to $928 million, driven by strong demand tied to the mild weather extending the roofing season in many regions and strong components attachment rate, as well as favorable mix and positive price. For the first quarter of 2024, OC expects net sales to be slightly below than the first quarter of 2023 while generating mid-teens margins.
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