Armstrong World Industries, Inc.
) slumped over 11% after the company reported its second-quarter
2014 results on Jul 25. Adjusted earnings fell 1% year over year to
60 cents per share impacted by lower volumes and rising lumber
costs, partly offset by favorable price and mix. Earnings also
missed the Zacks Consensus Estimate of 65 cents.
Including one-time items, earnings plunged 25.5% to 38 cents per
share from the prior-year quarter figure of 51 cents.
Net sales rose 0.5% year over year to $710 million but lagged the
Zacks Consensus Estimate of $723 million. Revenues came in at the
lower end of management's guidance range of $710???$750 million.
Positive price and mix led to the year-over-year improvement partly
offset by lower volumes.
Cost of sales went up 2% year over year to $554 million. Gross
profit declined to $155.7 million from $164 million in the year-ago
quarter. Consequently, gross margin contracted 140 basis points
(bps) year over year to 21.9%.
Selling, general and administrative (SG&A) expenses decreased
3.2% year over year to $114.7 million, due to higher spending on
promotional activity. Adjusted operating income dropped 5% year
over year to $66 million. Operating margin also declined 60 bps
year over year at 9.3%.
Armstrong World Industries, Inc - Earnings
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Net sales at the Building Products segment increased 2.3% to $323.5
million, aided by positive mix and price, partly offset by lower
volumes. Adjusted operating profit for the segment was $65 million
compared with $66 million in the year-ago quarter. Improved price
and mix and higher earnings from WAVE were offset by higher
manufacturing and input cost.
The Resilient Flooring segment reported a decline in sales to $247
million, compared with $251 in the year-ago quarter due to lower
volumes in the Americas and Europe, partially offset by improved
mix. The segment's adjusted operating profit remained flat at $18
million from the year-ago quarter.
Net sales in the reported quarter inched up 0.9% year over year to
$139 million driven by positive price and mix. The segment posted
adjusted operating profit of $3 million, flat with the prior-year
Cash and cash equivalents were $152.6 million as of Jun 30, 2014
compared with $304.7 million as of Jun 30, 2013. Cash flow from
operations was $22.4 million in the reported quarter compared with
$43.2 million in the prior-year quarter.
Armstrong World Industries lowered its full year 2014 adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA) guidance to the band of $370-$400 million from $400-$430
million. Adjusted earnings per share is expected to lie in
the range of $2.15 -$2.40. For full year 2014 free cash flow is
expected to be in the range of $20-$60 million.
For the third quarter of 2014, the company expects sales to be
between $740-$780 million and adjusted EBITDA in the range of
Armstrong World Industries expects that both residential and
commercial discretionary repair and remodel spend will remain flat
to down for the full year and overall commercial volumes will also
The company will benefit from improvements in unemployment and
housing prices while restrained demand for discretionary projects
remains concern in the near term. Moreover challenging market
conditions in Europe and Australia continue to pose as headwinds.
PA-based Armstrong World Industries is a leading global producer of
flooring products and ceiling systems for use in the construction
and renovation of residential, commercial and institutional
buildings. The company also designs, manufactures and sells kitchen
and bathroom cabinets in the U.S.
At present, Armstrong World Industries has a Zacks Rank #5 (Strong
Sell). However, some better-ranked stocks in the sector include
Quanex Building Products Corporation (
), United Rentals, Inc. (
) and Beazer Homes USA Inc. (
). All of these stocks carry a Zacks Rank #2 (Buy).
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