Apogee (APOG) Beats on Q1 Earnings, Raises FY19 Outlook

Apogee Enterprises, Inc. APOG reported earnings per share of 54 cents in first-quarter fiscal 2019 (ended Jun 2, 2018), down 4% from prior-year quarter figure of 56 cents. Adjusted earnings of 62 cents per share, flat compared with the year-ago quarter but ahead of the Zacks Consensus Estimate of 44 cents.

The company reported total revenues of around $337 million, up 24% year over year. Revenues surpassed the Zacks Consensus Estimate of $288 million.

Cost of sales in the quarter was up 27% year over year to $256 million. Gross profit grew 15% year over year to $81 million. Gross margin contracted 180 basis points (bps) to 24%. Selling, general and administrative (SG&A) expenses surged 27% year over year to $59 million. Adjusted operating income declined 7% year over year to $24.9 million. Operating margin shrunk 250 bps to 7.4%.

Revenues at the Architectural Framing segment soared 62% year over year to $179 million, driven by EFCO acquisition and growth in Architectural Framing Systems, Architectural Services and Large-Scale Optical Technologies. This was partially offset by an expected timing-related decline in Architectural Glass. On an organic basis, excluding the EFCO acquisition, revenues were comparable year over year.

In the quarter, the Architectural Framing Systems segment’s revenues surged year over year to $179 million driven by the EFCO acquisition. Excluding the acquisition, revenues rose 3%. The segment’s adjusted operating income in the quarter came in at $15.2 million compared with $14 million from the prior-year quarter.

The Architectural Glass Systems segment revenues were down 21% year over year to $77 million. The segment’s operating income plunged 83% to $1.6 million from $9.3 million reported in the year-earlier quarter.

Revenues at the Architectural Services segment were up 41% year over year to $71 million. The segment reported an operating profit of $5.2 million, significantly up from $0.8 million recorded in the year-ago quarter.

The Large-Scale Optical Technologies segment’s revenues improved 12% year over year to $20.8 million. Operating income in the reported quarter came in at $5 million, up 23% year over year.

The Architectural Framing Systems segment’s backlog improved to $427 million in the fiscal first quarter compared with $255 million a year ago. The Architectural Services’ segment backlog came in at $439 million — an improvement from $293 million in the prior-year quarter.

Apogee had cash and cash equivalents of $22 million at the end of fiscal first quarter 2019 compared with $23 million as of the end of the prior-year quarter. The company generated cash flow from operations of $25 million in first quarter fiscal 2019 compared with $6 million reported in the prior-year quarter. Long-term debt was $215 million as of Jun 2, 2018, compared with $216 million as of Mar 3, 2018.

For fiscal 2019, Apogee maintained revenue guidance of around 10%. Backed by solid first quarter performance, backlog growth and order activity as well the momentum in the North American construction industry, the company raised operating margin guidance to 8.9-9.4% from the previous 8.8-9.3%. The company expects earnings per share for the fiscal to be at $3.48-$3.68, up from the prior guidance of $3.43-$3.63. The guidance excludes the after-tax impact of amortization of short-lived acquired intangibles associated with the acquired backlog of Sotawall and EFCO of $3.8 million (or 13 cents per share).

Apogee remains focused on operational improvement initiatives, which will drive revenues, along with operating margin improvement in fiscal 2020 and beyond. The company anticipates investment in geographic expansion, in architectural framing systems, and in architectural glass will boost revenues. EFCO is delivering quarter-over-quarter improvements in margins and the company remains on track to achieve its synergy goals by fiscal 2020.

Shares of Apogee have gained around 12% in the past three months against the industry’s decline of 17%.

Apogee carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector include Actuant Corporation ATU, DMC Global Inc. BOOM and Terex Corporation TEX. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Actuant has expected long-term growth rate of 15.6%. Its shares have gained 25% over the past three months.

DMC Global has expected long-term growth rate of 20%. Its shares have appreciated 71% over the past three months.

Terex has expected long-term growth rate of 21%. Its shares have appreciated 11% in the past three months.

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.