Apogee Enterprises, Inc.’s APOG earnings increased almost two-fold to 41 cents per share in first-quarter of fiscal 2016 (ended May 30, 2015) from 21 cents in the year-ago quarter. Earnings also outpaced the Zacks Consensus Estimate of 35 cents, reflecting a positive earnings surprise of 17%.
The company reported total revenues of $240 million, which rose roughly 14% year over year. Revenues also came ahead of the Zacks Consensus Estimate of $239 million.
Apogee’s impressive result was driven by volume growth, positive pricing and productivity improvement mainly in architectural businesses. The company also witnessed top and bottom line growth in each segment.
Operational Update
Cost of goods sold increased 9% to $184 million from $169 million in the year-ago quarter. Gross profit improved 34% year over year to $55.6 million. Gross margin also expanded 350 basis points (bps) to 23.2%. Selling, general and administrative (SG&A) expenses rose 11% year over year to $37.4 million. Operating income was $18 million, rising significantly from $7.8 million earned in the year-ago quarter. Operating margin grew 390 bps year over year to 7.6%.
Segment Performance
Revenues for the Architectural Glass segment increased 27% year over year to $101 million driven by strong volume growth, rise in pricing and improved mix. Operating income in the quarter grew considerably to $8.2 million compared with $2.8 million in the prior-year quarter.
Revenues for the Architectural Services segment went up 8% year over year to $55.7 million. The segment reported operating profit of $0.9 million, which increased more than five-fold from $0.2 million in the year-ago quarter.
The Architectural Framing Systems segment’s revenues increased 12% year over year to $71.9 million. The segment’s operating income improved to $5.3 million from $1.9 million in the prior-year quarter.
Large-Scale Optical Technologies segment’s revenues edged up 1% year over year to $20.2 million. Operating income in the reported quarter was $4.9 million, which increased 23% from $3.9 million in the year-ago quarter.
Financial Position
Apogee ended the quarter with cash and cash equivalents of $28 million versus $17 million in the year-ago quarter. The company generated cash flow from operations of $20.9 million during the first quarter compared with $1.2 million in the prior-year quarter.
Apogee’s backlog increased 22% year over year to $470.8 million. Roughly 66% or $311 million of the backlog is expected to be delivered in fiscal 2016 and the balance 34% or around $160 million in fiscal 2017.
Fiscal 2016 Outlook
Apogee has increased its fiscal 2016 earnings per share outlook range to $2.10—$2.25 from $2.05—$2.20. The company retained its revenue growth guidance and expects it to be in the band of 10% to 15%. Capital expenditures are projected to range from $45 million to $50 million as Apogee intends to make investments toward increasing capacity and productivity. Gross margin is expected to be around 24%.
Apogee expects to cross the $1 billion threshold in revenues in fiscal 2016 and to achieve a trailing 12-month operating margin of 10% midway through fiscal 2017. For the longer term, it expects revenues of $1.3 billion and operating margin of 12% in fiscal 2018.
Apogee will benefit from its sound backlog, strong momentum in the architectural markets and robust bidding and award activity. Moreover, the company continues to make significant investments for capability, capacity and productivity, including in its architectural glass business where it completed installation and startup of a new coater. These investments will support growth.
Apogee Enterprises is a leader in technologies for the design and development of value-added glass products, services and systems. Apogee currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the industrial product sector include AGCO Corporation AGCO, Albany International Corp. AIN and Allegion plc Ordinary Shares ALLE. All these stocks carry a Zacks Rank #2 (Buy).
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