Apogee Enterprises Inc. (APOG) reported earnings of 11 cents per share for fiscal 2012 fourth quarter ending March 3. Results, which comfortably surpassed the Zacks Consensus Estimate of 7 cents, improved considerably from the year-ago quarter in which the company reported a loss of 12 cents per share.
Fiscal 2012 earnings came in at 17 cents per share compared with a loss of 51 cents per share in fiscal 2011. Results were ahead of the Zacks Consensus Estimate of 12 cents per share.
Total revenue increased 14% to $662.5 million in fiscal 2012. The improvement in revenue was driven by double-digit growth in Architectural Products and Services revenue.
Operational Update
Apogee’s total revenue improved 14% to $168.7 million in the reported quarter, beating the Zacks Consensus Estimate of $168 million by a small margin. The increase in revenue was attributable to growth in Architectural Products and Services as well as Large-Scale Optical revenue.
Cost of sales increased 9% year over year to $135.9 million during the quarter while selling, general and administrative expenses were up 4% year over year to $29.9 million. Apogee reported an operating profit of $2.8 million in the quarter, an improvement from the year-ago quarter’s operating loss of $5.6 million.
Segmental Performance
Architectural Products and Services Segment: Net sales increased 15% year over year to $147.4 million in the quarter. The improvement was due to improved architectural glass pricing and project mix, in addition to market share gains in the window and storefront businesses.
The segment reported an operating loss of $0.5 million compared with the year-ago loss of $9.9 million. The year over year decline in operating loss was brought about by higher architectural glass pricing and mix, as well as leverage on volume growth, partially offset by lower margin work in the installation business.
The segment’s backlog was $242.0 million at the end of the quarter compared with $230.7 million at the end of the third quarter and $237.2 million at the end of the prior-year quarter. Of this, 76% is expected to be delivered in fiscal 2013 and 24% in fiscal 2014.
Large-Scale Optical Segment: Segment revenue increased 7% year over year to $21.3 million. The segment’s operating profit decreased to $4.0 million in the quarter from $5.5 million in the year ago quarter.
Financial Position
Apogee ended the quarter with cash and short-term investments of $79.3 million compared with $46.4 million at the end of the sequentially preceding quarter. Long-term debt decreased slightly to $20.9 million at the end of fiscal 2012 compared with $21.4 at the end of fiscal 2011. During fiscal 2012, cash provided by operating activities was $27.9 million compared with $7.9 million used in the comparable year-ago period.
Looking Ahead
The company expects revenue and earnings growth in fiscal 2013, driven by increased market share of the architectural business. It intends to focus on operational improvements, introduction of new products as well as growing international opportunities.
Apogee expects revenue growth in the mid-single digits in fiscal 2013 due to geographic expansion in installation and storefront businesses in the U.S. The company expects earnings in the range of 40-50 cents per share. Guidance was well below the current Zacks Consensus Estimate of 59 cents.
It also expects to generate positive free cash flow after spending nearly $25 million in certain investments related to the introduction of new products, productivity improvements and maintenance requirements.
Neutral on Apogee
Apogee has a robust architectural backlog to start with in the fiscal 2013. Furthermore, it plans to invest a considerable amount in new products to boost its product portfolio. Furthermore, it intends to spend on capacity as well as productivity improvements. The company, however, faces competition from the privately held AGC Flat Glass North America, Inc., Guardian Glass Company and Pilkington Group Limited. Our long-term recommendation on Apogee remains Neutral. Currently, the stock retains a Zacks #3 Rank, implying a short-term “Hold” rating.
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