Apogee Q3 Earnings Rise Y/Y But Miss Estimates, Shares Up

Shares of Apogee Enterprises, Inc. (APOG - Analyst Report) rose nearly 5% after the company reported strong third-quarter fiscal 2015 results. Earnings improved an impressive 42% year over year to 47 cents per share. However, it lagged the Zacks Consensus Estimate by a penny.

Total revenue increased 23% year over year to $244.4 million driven by double-digit growth in each segments and also surpassed the Zacks Consensus Estimate of $232 million.

Apogee Enterprises, Inc - Earnings Surprise | FindTheBest

Operational Update

Cost of goods sold increased 20% to $187.8 million from $156 million in the year-ago quarter. Gross profit improved 31% year over year to $56.7 million. Gross margin also expanded 140 basis points (bps) to 23.2%. Selling, general and administrative (SG&A) expenses rose 17% year over year to $36 million. Operating income was at $20.6 million, rising 62% from $12.7 million earned in the year-ago quarter. Operating margin grew 200 bps year over year to 8.4%.

Segment Performance

Revenues for the Architectural Glass segment increased 23% year over year to $90.3 million. Operating income in the quarter grew nearly four-fold year over year to $5.8 million, aided by higher volume and improved pricing.

Revenues for the Architectural Services segment rose 10% year over year to $56.2 million. The segment reported an operating profit of $0.3 million compared with $0.4 million in the year-ago quarter, impacted by write downs on few project.

The Architectural Framing Systems segment’s revenues increased 36% year over year to $80.4 million, with an organic growth of 19% excluding the Canadian acquisition. The three U.S. businesses in the segment reported double-digit growth. The segment’s operating income grew 31% year over year to $7.6 million.

Large-Scale Optical Technologies segment’s revenues were up 13% year over year to $25.5 million driven by strong orders for all channels, particularly in retail. Operating income in the reported quarter was $7.9 million, which increased 30% from $6.1 million in the year-ago quarter, benefitting from improved product mix.

Financial Position

Apogee had cash and short-term investments of $34.3 million at the end of the reported quarter compared with $28.7 million at the end of fiscal 2014. Cash flow from operations was $37.1 million for the period of nine months, ended Nov 29, 2014, lower than $42.7 million in the year-ago period. Long-term debt was $22.6 million at the end of third-quarter fiscal 2015 compared with $20.7 million in the prior-year period.

Consolidated backlog at the end of the third quarter increased 64.7% to $493.9 million from $299.9 million at the end of the prior year third quarter. Approximately 37% or $182 million of the backlog, is expected to be delivered in fiscal 2015 and the balance 63% or around $312 million in fiscal 2016 and beyond.

Fiscal 2015 Guidance

For fiscal 2015, Apogee reaffirmed its revenues guidance of at least 20% growth. The company raised the lower end of its earnings per share projection of $1.62—$1.72, which now stands in the band of $1.64—$1.72. Apogee is expecting strong year-over-year improvement on the back of its strategies to grow through new geographies, new products and new markets along with focus on productivity and operational improvements. Strength in architectural business combined with positive forecasts for commercial construction markets will also drive growth.

This new guidance is based on increasing backlog, commitments and bidding pipeline in the fourth quarter. Backlog for fiscal 2016 and beyond will also remain strong with robust bidding and quoting activity.

Apogee expects capital spending for fiscal 2015 to be approximately $35 million, including capacity expansions underway in architectural glass and architectural finishing. The company also anticipates that free cash flow will be positive and gross margin will be about 22 % in fiscal 2015.

In addition, Apogee extended its long-term outlook to fiscal 2018 expectations for revenues of $1.3 billion and 12% operating margin.

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).  

Some other stocks worth considering in the industrial product sector include ACCO Brands Corporation (ACCO - Snapshot Report), ARC Document Solutions, Inc. (ARC - Snapshot Report) and Barnes Group Inc. (B - Snapshot Report). All of these stocks carry a Zacks Rank #2 (Buy).


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