On Nov 28, we maintained our Neutral recommendation on leading
designer and developer of glass products, services, and systems,
Apogee Enterprises Inc.
). We reiterated our recommendation owing to our concerns related
to moderating global economic growth. However, strong backlog,
revenue growth opportunities from its focus on operational
improvements, expansion and new product launches, and a recovery
in U.S. construction are some positives.
Apogee's second-quarter fiscal 2014 earnings of 21 cents per
share were up 17% from the year-ago quarter. Total revenue
improved 1.3% to $178 million.
For fiscal 2014, Apogee increased its earnings guidance range to
93 cents to $1.00 per share from the prior guidance of 90 cents
to $1.00 per share on the back of strong backlog, project
pipeline and operating performance. However, the company
maintained its revenue growth guidance in the high-single
Gross margin is anticipated to be at least 22% in fiscal 2014.
Capital spending for fiscal 2014 is projected in the range of $40
to $45 million as Apogee continues to invest in growth,
productivity and product development capabilities.
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Consolidated backlog at the end of the second quarter was $304
million, up from $301 million in the prior-year quarter. Apogee's
backlog remains strong, which bodes well for its future
Apogee has faced challenging commercial construction market
conditions so far. However, the U.S. construction is finally
stabilizing and is on the road to a much-awaited recovery. This
bodes well for Apogee going ahead.
So far in fiscal 2014, Apogee closed two acquisitions. In August,
Apogee purchased Englewood, CO-based Custom Window Company, Inc.,
which makes historically accurate aluminum window products and
Toronto-based Alumicor Limited, which finishes and fabricates
aluminum frames for window, storefront, entrance and curtainwall
products for the Canadian commercial construction industry. Both
the acquisitions are in sync with Apogee's strategy to expand its
architectural framing systems segment through geographic
expansion, new products and domestic acquisition.
However, macroeconomic conditions pose a headwind for Apogee's
performance in fiscal 2014. Moderating global economic growth can
affect its results.
Other Stocks to Consider
Apogee retains a short-term Zacks Rank #3 (Hold). Other stocks in
the same sector with favorable Zacks ranks are
CaesarStone Sdot-Yam Ltd
Trex Co. Inc.
Vulcan Materials Co.
). While CaesarStone carries a Zacks Rank #1 (Strong Buy), Trex
and Vulcan holds a Zacks Rank #2 (Buy).