Armstrong World Down to Strong Sell - Analyst Blog


On Mar 5, Zacks Investment Research downgraded Armstrong World Industries, Inc. ( AWI ) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Following the release of its fourth-quarter 2012 results on Feb 19, earnings estimates for this $3.13 billon company witnessed a sharp downward revision. In the last 30 days, The Zacks Consensus Estimate for 2013 decreased 14% to $2.44 per share while that for 2014 was down 12% to $3.05 per share.

Though Armstrong World's fourth-quarter earnings per share of earnings increased 89% to 34 cents, beating the Zacks Consensus Estimate by a penny, sales declined 2% to $613 million. Unfavorable foreign exchange, lower volume particularly in Europe and unfavorable mix offset the benefits from higher price.  

The Building Products segment was the lone segment to witness revenue growth of 1% as higher volumes in the North American commercial business managed to mitigate volume declines in Europe. However, the Resilient Flooring segment's revenues dipped 3%, driven by lower volumes in Europe and in North America where continued weakness in commercial sectors tied to public spending and lower home center sales dragged down volumes.  The Wood Flooring segments revenues declined 3% due to the sale of the Patriot distribution business 

For 2013, the company expects sales to be in the $2.7 to $2.8 billion, up 3% to 7% from 2012. Adjusted EBITDA is expected to be in the $390 to $420 million range, down 3% to up 5% compared with 2012.  Adjusted EPS is expected to lie in the band of $2.30 to $2.60, down 8% to up 4% compared with 2012. For the first quarter of 2013, sales are expected to be between $600 and $650 million and adjusted EBITDA to be in the range of $68 to $83 million.    

Armstrong's volumes are expected to remain affected as global markets continue to struggle, particularly Europe. Furthermore, the outlook for residential repair and remodel activity also remains weak as customers remain cautious regarding their spending. 

Other Stocks to Consider

Among the other stocks in the same industry, Headwaters Inc. ( HW ), James Hardie Industries plc ( JHX ) and Masco Corp. ( MAS ) hold a Zacks #2 Rank (Buy) and are favorable options for investors.

ARMSTRONG WORLD (AWI): Free Stock Analysis Report

HEADWATERS INC (HW): Free Stock Analysis Report

JAMES HARDI-ADR (JHX): Free Stock Analysis Report

MASCO (MAS): Free Stock Analysis Report

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Zacks Investment Research

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: AWI , HW , JHX , MAS

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