Apogee Enterprises, Inc.
) rose 4.4% as the company reported third-quarter fiscal 2014
earnings of 33 cents per share, up 18% from 28 cents earned in
the prior-year quarter. Reported earnings were in line with the
Zacks Consensus Estimate. The improvement was particularly driven
by improved mix and productivity in the Architectural Glass
segment as well as increasing margins and good project execution
in the Architectural Services segment.
Total revenue increased 4.7% year over year to $199 million in
the quarter, falling short of the Zacks Consensus Estimate of
$206 million. Improvement in all segments barring Architectural
Glass led to the growth.
Cost of goods sold increased 5% to $156 million in the quarter.
Gross profit improved 3% to $43.4 million. Gross margin in the
quarter contracted 40 basis points to 21.8%. SG&A expenses
remained flat at $30.7 million. Operating income was $12.7
million, up 11% from $11.4 million earned in the year-ago
quarter. Operating margin expanded 40 basis points to 6.4%.
Revenues from the Architectural Glass segment decreased 2% year
over year to $73.4 million due to project timing. Operating
income in the quarter was $1.6 million, more than three times the
$0.5 million earned in the year-ago quarter, helped by improved
mix and productivity.
Revenues from the Architectural Services segment increased 4%
year over year to $51.2 million. The segment reported an
operating profit of $0.35 million, an improvement from a loss of
$0.2 million in the prior-year quarter.
The Architectural Framing Systems' revenues increased 14% year
over year to $59 million. Almost half of the growth was driven by
the inclusion of the Alumicor acquisition, while the balance was
driven by the U.S. storefront business. The segment's operating
income increased 4% to $5.8 million from the year-ago quarter.
Improved performance in the storefront and finishing businesses
was offset by a weaker window business.
Large-Scale Optical Technologies segment's revenues went up 5% to
$22.7 million. Operating income in the reported quarter was $6.1
million, down 8% from $6.5 million in the year-ago quarter.
Increased promotional activities as well as manufacturing
inefficiencies early in the quarter offset volume growth and
positive mix in the segment.
Apogee had cash and short-term investments of $22.5 million at
the end of the reported quarter compared with $87.5 million at
the end of fiscal 2013. Cash flow from operating activities was
$42.7 million during the first nine months of fiscal 2014
compared with $22.9 million in the prior-year comparable period.
Apogee acquired Alumicor Limited, a Canadian non-residential
window, storefront, entrance and curtainwall company, for
approximately $52 million in cash. Long-term debt amounted to
$20.7 million compared with $30.8 million at the end of fiscal
Consolidated backlog at the end of the third quarter was $300
million, down from $303 million at the end of the prior-year
quarter. Approximately 45% of the backlog, or $136 million, is
expected to be delivered in fiscal 2014, and the balance 55%, or
$164 million, in fiscal 2015.
Fiscal 2014 Guidance
For fiscal 2014, Apogee raised the lower end of its earnings
guidance and now expects earnings in the band of 95 cents to
$1.00 per share from the previous guidance of 93 cents to $1.00
per share. The lower end was guided up on the back of strong
backlog at improving margins and project pipeline. The company
guides annual asales growth in the range of 10 to 11%.
Gross margin is anticipated to be at least 22% in fiscal 2014.
Capital spending for fiscal 2014 is projected in the range of $45
million, as Apogee continues to invest in growth, productivity
and product development capabilities.
Apogee targets $1 billion in revenues by the end of fiscal 2016.
Apogee also expects to achieve 10% operating margins on the back
of its focus on productivity and operational improvements.
Apogee's backlog remains strong, which bodes well for its future
performance. The company intends to add new capacities and fund
acquisitions. Focus on operational improvements, expansion in new
geographies and markets, and new product launches will fuel
Apogee's revenue growth going forward.
Apogee has faced challenging commercial construction market
conditions so far. However, the U.S. construction is finally
stabilizing and is on track for the much-awaited recovery, which
looks promising for Apogee.
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 #2 (Buy). Some other
stocks worth considering in the sector include
CaesarStone Sdot-Yam Ltd.
Simpson Manufacturing Co., Inc.
Trex Co. Inc.
). While CaesarStone Sdot-Yam holds a Zacks Rank #1 (Strong Buy),
Simpson and Trex have a Zacks Rank #2 (Buy).
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