On June 6, 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 80% increase
in its fourth-quarter fiscal 2014 earnings to 27 cents per share.
The improvement was particularly driven by increased sales,better
pricing and project margins.
For fiscal 2015, Apogee guides revenue growth in the range of 15%
to 20% and expects earnings per share to be in the band of $1.35 to
$1.50. This guidance is based on an increasing backlog, commitments
and bidding pipeline as well as the improving commercial
The outlook for the U.S. commercial construction market based on
McGraw-Hill forecast is of high-single-digit growth in 2015. Apogee
hopes to outperform commercial construction markets by around five
percentage points and expects previous acquisitions to be accretive
to earnings in fiscal 2015.
Apogee anticipates capital spending for fiscal 2015 to be about $40
million. The spending will aid product development capabilities and
productivity as well as positive free cash flow. In addition, the
company predicts gross margin for fiscal 2015 to be approximately
Apogee targets $1 billion in revenues and 10% in operating margins
by fiscal 2016. Improvements in volume, mix, project margins and
operating leverage will drive earnings. The company intends to add
new capacities and fund acquisitions. Further, Apogee's strategy to
expand through geographic expansion, domestic acquisition and
addition of new products will also drive growth.
Regarding the timing of the backlog, Apogee anticipates
approximately $314 million or 95% of backlog to be delivered in
fiscal 2015, and the balance 5% or approximately $15 million in
fiscal 2016 and beyond. The company expects strong backlog growth
in the first quarter of fiscal 2015 driven by a growing pipeline of
project commitments and awards as well as a high level of bidding
On the flip side, The American Institute of Architects' (AIA)
Architecture Billings Index (ABI), increased to 49.6 in Apr 2014,
from 48.8 in March. Though the index showed improvement, any
reading below 50 signifies a decline in billings. Furthermore, weak
public construction spending remains the most significant risk to a
Moreover, macroeconomic uncertainties, political issues and
volatility in foreign exchange rates remain challenges for Apogee
in the near term.
Apogee currently carries a Zacks Rank #4 (Sell).
Key Picks from the Sector
Some better-ranked stocks worth considering in the sector include
Atlas Copco AB
Blount International Inc.
), all of which sport a Zacks Rank #2 (Buy).
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