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Armstrong World Buys MRK, Bolsters Architectural Specialties

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Armstrong World Industries, Inc. AWI continues its buyout spree with the recent acquisition of MRK Industries, Inc. — a manufacturer of specialty metal ceiling, wall and exterior solutions. This marks Armstrong World’s fifth acquisition in three years. Although the company has not yet disclosed the financial terms of the transaction, it has funded the acquisition with available cash.

Buyout Synergies

Located in Libertyville, IL, MRK generates annual revenues of approximately $14 million. This acquisition increased its participation in the high-value Architectural Specialties segment.

Armstrong World follows a systematic inorganic strategy to enhance its portfolio. The company has been strategically investing in new products, sales and support services, as well as advanced manufacturing capabilities.

On Mar 4, 2019, it acquired Architectural Components Group, Inc. (“ACGI”), a leading custom wood ceilings and walls solution provider. The ACGI acquisition — the largest to date for Armstrong World — added $7 million to its total net sales in the third quarter.


Courtesy of the aforementioned tailwinds, shares of Armstrong World have gained 62.6% year to date, outperforming its industry’s 46.3% rally. The company has been recording solid earnings and revenue improvement over the last few quarters. The strong performance was mainly driven by solid volume growth in the Architectural Specialties unit, higher AUVs in the Mineral Fiber segment, and lower manufacturing expenses and higher equity earnings from WAVE.

Thanks to the important additions, its Architectural Specialties segment has been performing pretty well over the last few quarters. In the last reported quarter, net sales in the Architectural Specialties segment grew 22.6% year over year, courtesy of higher volumes owing to increased market penetration. Acquisitions of ACGI, Plasterform and Steel Ceilings added to the positives.

Given the company’s robust pipeline and focus on actively expanding strategic capabilities, Armstrong World expects mergers and acquisitions activity to continue. Encouragingly, it also expects to continue the trend of increasing free cash flow in double digits.

Zacks Rank & Key Picks

Armstrong World currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Construction sector are Gibraltar Industries, Inc. ROCK, Installed Building Products, Inc. IBP and TopBuild Corp. BLD, each sporting a Zacks Rank #1 (Strong Buy). You can also see the complete list of today’s Zacks #1 Rank stocks here.

Gibraltar’s earnings for 2019 are expected to increase 19.2%.

Installed Building Products and TopBuild’s three-five year expected EPS growth rates are projected at 16% and 28%, respectively.

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TopBuild Corp. (BLD) : Free Stock Analysis Report
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