Armstrong World Industries, Inc. AWI reached a new 52-week low of $45.73 yesterday, before closing a notch higher at $46.19.Year-to-date, the company’s shares have delivered a negative return of around 9.6%.
The manufacturer of floors, ceilings and cabinets posted soft third-quarter 2015 results, wherein adjusted earnings declined 9% and sales dropped 3%, both on a year-over-year basis. The decline was mainly due to unfavorable impact from foreign exchange.
Sales for the quarter were slightly below Armstrong World’s expectations due to softness in the Chinese office sector, which impacted the ceilings business. The company anticipates the trend will continue hurting growth in the fourth quarter of 2015. Further, the company still sees market-related weakness in the North American ceilings market.
Notably, Armstrong World trimmed the upper end of 2015 sales guidance to the range of $2.4–$2.45 billion. The company, however, increased the lower end of its adjusted earnings per share outlook and expects it to be in the range of $2.15 to $2.35. Despite lower input costs, foreign exchange headwind remains a matter of concern for Armstrong World.
The strength of the U.S. dollar has also been a concerning factor. Moreover, Armstrong World has seen shortfalls in sales of wood flooring and significant economic declines in Russia and China. China and Russia are two key markets for the company, and hence, negative volume and additional costs associated with investment in the Russian plant has created the biggest headwinds.
Restrained activity in Europe and the U.S. repair and remodel markets along with challenging emerging markets will also hurt growth.
These bearish factors have triggered a downward tendency in the company’s estimates in the past 60 days. In fact, the Zacks Consensus Estimate for 2016 decreased nearly 1.3% to $2.29 per share.
Armstrong World carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked stocks in the same sector are Gibraltar Industries, Inc. ROCK, Quanex Building Products Corporation NX and Masco Corporation MAS. While Gibraltar Industries and Quanex Building sport a Zacks Rank #1 (Strong Buy), Masco Corporation holds a Zacks Rank #2 (Buy).
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