Armstrong World (AWI) Hits 52-Week High: What’s Driving It?

On Nov 28, Armstrong World Industries, Inc. AWI crafted a 52-week high of $59.05 during intra-day trading, finally closing lower at $59.00.

Armstrong World has a market cap of $3.1 billion. The average volume of shares traded over the last three months is approximately 456.2K. Investors are optimistic on this Zacks Rank #2 (Buy) company’s focus on transformation plans, improvement in AUV and innovation in products.

The stock has gained 41.4% in a year’s time, higher than the S&P 500’s gain of 18.7%. Armstrong World has also outperformed the industry’s gain of 19.9% with respect to share price movement during the same time frame.

What's Driving Armstrong World?

Recently, Armstrong World signed a definitive agreement to divest its EMEA (Europe, the Middle East and Africa) and Pacific Rim businesses, in a bid to focus on investment and innovation in high-end mineral fiber manufacturing as well as expand capabilities in Architectural Specialties. The divestment is a significant step of an ongoing transformation plan.

Armstrong World expects the divestment to complete in mid-2018 and will realize around $250 million of net cash following the deal’s accomplishment. Moreover, this move will enable the company to focus on resources of its core Americas ceilings and walls businesses.

Armstrong World remains focused on improving sales dollars per unit sold, or average unit value (AUV). Over the past three quarters, it implemented price increases for ceiling tile, and grid products in the Americas and EMEA. The company will announce further pricing actions depending on movements in raw material prices or foreign currency valuations. Further, its innovative and latest product enhancements will drive AUV through better mix and better like-for-like pricing.

Notably, Armstrong World’s high-performance ceiling system portfolio, which includes the recently-launched Total Acoustics and Sustain families, displays its endeavor to offer innovative product to customers.

Backed by these factors, Armstrong World raised its adjusted earnings per share guidance for 2017 to the range of $2.80-$2.90 per share, reflecting 24% year-over-year growth at the mid-point. Further, year-over-year sales growth is estimated in the 6-9% range, translating to total sales of $1.31-$1.34 billion. The company expects to benefit from pent-up demand following the hurricanes, a strong order backlog and improving construction market.

Upward Estimate Revisions

Furthermore, Armstrong World’s positive estimate revisions reflect optimism in the company’s potential, as earnings growth is often an indication of robust prospects (and stock price gains) ahead. Estimates for Armstrong World moved up over the past month, reflecting analysts’ bullish sentiments. The earnings estimate for 2017 has gone up 2.2%, while that of 2018 inched up 0.7%.

The above-mentioned tailwinds have raised investors’ optimism on the stock and are anticipated to boost the company’s share price in the days ahead.

Other Stocks to Consider

Other top-ranked stocks in the same space include Patrick Industries, Inc. PATK, United Rentals, Inc. URI and Owens Corning OC. All three stocks carry a Zacks Rank 2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Patrick Industries has a long-term earnings growth rate of 10.6%. Its shares have been up 28.3% year to date.

United Rentals has a long-term earnings growth rate of 18.5%. So far this year, its shares have rallied 48.3%.

Owens Corning has a long-term earnings growth rate of 15.3%. Its shares have gained 73.7% year to date.

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