On Aug 13, 2014, we issued an updated research report on Armstrong World Industries, Inc. (AWI), a leading global producer of flooring products and ceiling systems for use in the construction and renovation of residential, commercial and institutional buildings.
Armstrong World’s estimates have been undergoing negative revisions following its second-quarter results and trimmed guidance. Adjusted earnings fell 1% year over year to 60 cents per share, impacted by lower sales volumes and rising lumber costs, although partly offset by its favorable price and mix.
Armstrong World Industries trimmed its full-year 2014 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) guidance to the band of $370–$400 million from $400–$430 million. Adjusted earnings per share are expected to lie in the range of $2.15–$2.40, down from the previous range of $2.15–$2.45. The lowered guidance was due to the overall softer demand environment witnessed in the first half of 2014, which has tempered the company’s outlook for the back half of the year. Armstrong World Industries anticipates that both residential and commercial discretionary repair and remodel spend will remain flat to down for the full year and overall commercial volumes will also be down.
Armstrong World expects Western Europe and Australia to be flat to down throughout 2014, while the Middle East will continue to experience growth. The company also expects Russia to be down from high single-digits to low double-digits given the current political environment.
The business in Europe continues to underperform. The company is, therefore, exploring various ways of divesting this money-losing business. Furthermore, raw material inflation remains a major concern for the company.
Other Stocks to Consider
At present, Armstrong World carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include UCP, Inc. (UCP), Boise Cascade Company (BCC) and Winnebago Industries, Inc. (WGO). All of these stocks hold a Zacks Rank #2 (Buy).
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