On Mar 7, 2014, we issued an updated research report on
Apogee Enterprises, Inc.
). The leader in technologies for design and development of value
added glass products, services and systems reported an 18%
increase in its third-quarter 2013 earnings to 33 cents per
share. The improvement was particularly driven by improved mix
and productivity in the Architectural Glass segment as well as
increasing margins and good project execution.
For fiscal 2014, Apogee raised the lower end of its earnings
guidance on the back of strong backlog at improving margins and
project pipeline. Apogee now expects earnings in the band of 95
cents per share to $1.00 per share compared with the previous
guidance of 93 cents per share to $1.00 per share. The company
guides annual sales growth in the range of 10-11%.
Consolidated backlog at the end of the third quarter was $300
million. The company has maintained this level for six straight
quarters. 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. Apogee's backlog remains strong,
which bodes well for its future performance.
Apogee targets $1 billion in revenues and 10% operating margins
by fiscal 2016. Its focus on operational improvements, expansion
in new geographies and markets, and new product launches will
fuel revenue growth going forward.
Apogee remains focused on its strategy to expand its
architectural framing systems segment through geographic
expansion, new products and domestic acquisition. The company's
acquisition of Custom Window Company, Inc., which makes aluminum
window products, will enable it to better serve its customers in
the Western U.S. and the historical renovation market
Furthermore, the acquisition of Alumicor Limited, which
finishes and fabricates aluminum frames for window, storefront,
entrance and curtainwall products for the Canadian
commercial construction industry, will help Apogee expand its
presence in the Canadian non-residential market, and will also
contribute to growth through new product introductions.
On the flipside, in the first three quarters of fiscal 2014,
operating margins in the Architectural Framing Systems segment
declined due to the lower sales in the window business because of
an anticipated gap in the schedule for more complex projects,
resulting in lower capacity utilization. Third-quarter capacity
utilization across all architectural manufacturing businesses was
68% in the third quarter.
Low capacity utilization might continue to adversely impact
the company's margins. If the company fails to achieve
near-to-intermediate market share gains, it will be left with a
large amount of idle capacity. This would negatively impact
profitability and the return on invested capital (ROIC) for
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Furthermore, macroeconomic conditions might be a headwind for
Apogee's performance in fiscal 2014. Moderating global economic
growth can limit Apogee's near-term revenue visibility.
Apogee currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks worth considering in the sector include
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), all of which sport a Zacks Rank #1 (Strong Buy).