Apogee Returns to Profit - Analyst Blog


Apogee Enterprises Inc. ( APOG ) reported earnings per share of 20 cents for fiscal 2012 third quarter ending November 26. Results reversed the loss per share of 8 cents in the year-ago quarter and were ahead of the Zacks Consensus Estimate of 11 cents.

Operational Update

Apogee's total revenue increased 19% to $174.9 million in the reported quarter, outpacing the Zacks Consensus Estimate of $170 million. The increase in revenue was largely driven by double-digit growth in Architectural Products and Services revenue.

Costs of sales increased 13% year over year to $140 million during the quarter and selling, general and administrative expenses were up 11% year over year to $27.6 million. Apogee reported an operating profit of $7.1 million in the quarter, a stark improvement from the year-ago quarter's loss of $1.8 million.

Segmental Performance

Architectural Segment: The segment reported net sales of $152 million in the quarter under review, up 21% year over year. The addition of Brazilian architectural glass business, increase in volumes in the window and storefront businesses as well as higher architectural glass pricing aided the segment to deliver solid results.

The segment reported an operating profit of $0.6 million, reversing year-ago loss of $8.4 million helped by higher architectural glass pricing and leverage on volume growth, partially offset by lower margin work in the installation business.

The segment's backlog was $230.7 million at the end of the quarter compared with $231.3 million at the end of the second quarter and $165.7 million at the end of the prior-year quarter. Of this 41% is expected to be delivered in fiscal 2012, 55% in fiscal 2013 and the balance in fiscal 2014.

Large-Scale Optical Segment: Segment revenue increased 6% year over year to $22.8 million. The segment operating profit remained flat at $7.4 million.

Financial Position

Apogee ended the quarter with cash and short-term investments of $46.4 million compared with $45.3 million at the end of the sequentially preceding quarter. Long-term debt remained flat at $21.1 million compared with the second quarter. During the first nine months of fiscal 2012, cash used in operating activities was $4.72 million, compared with $25.1 million used in the comparable year-ago period.

Looking Ahead

The company expects to remain profitable in the fourth quarter but cautions that revenues will be down sequentially due to Architectural project timing and Large-Scale Optical seasonality.

Given the upbeat third quarter results Apogee has upped its fiscal 2012 outlook. The company now expects revenues to increase approximately 14%, up from its previous guidance of more than 10%. Fiscal 2012 EPS is envisioned at more than 7 cents. The company also expects to generate positive cash flow in fiscal 2012.

Our Take

Apogee's long-term strategies have helped the company survive the loss-making environment and maintain its strong balance sheet. The strategy includes a number of cost cutting initiatives, which help the company to remain focused on productivity improvements in order to counter the ill effects of a downturn in commercial construction.

The company maintained its capacity and workforce to respond to potential growth in fiscal 2012, and continues to emphasize longer-term strategies to expand its energy-efficient architectural glass offerings both domestically and all over the world. We maintain our Neutral recommendation on Apogee. The quantitative Zacks #3 Rank (short-term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.

Apogee Enterprises is a technology leader in the design and development of value-added glass products, services and systems. The company presently has two reportable segments - The Architectural segment and Large-Scale Optical Technologies. Apogee competes with privately held AGC Flat Glass North America, Inc., Guardian Glass Company and Pilkington Group Limited.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: APOG

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