Quantcast

Armstrong World (AWI) Rides on Repair & Remodel Activity


Shutterstock photo

On Jun 14, we issued an updated research report on Armstrong World Industries, Inc. AWI . The company's results will be aided by strong repair and remodel activity, as well as the continuation of positive new building construction activity. Further, focus on restructuring activities, investment in new products and the Tectum acquisition is anticipated to drive growth.

Let's illustrate these growth factors in detail.

Volumes to Boost Top Line

For 2018, Armstrong World projects net sales growth in the range of 5-7% aided by a modest upturn in volume, average unit value (AUV) improvement in Mineral Fiber segment and continued double-digit sales gains in the Architectural Specialties segment. Driven by sales gain, productivity improvements in plants and impact of announced restructuring activities aiding the bottom line, the company expects EBITDA improvement more than 10% for the year.

The company's EPS guidance is in the range of $3.60-$3.82, reflecting year-over-year growth of 19-27%. The company's results will also be aided by strong repair and remodel activity, as well as the continuation of positive new building construction activity.

Investment in Product Launches to Reap Benefits

The company has been strategically investing in new products, sales and support services, and advanced manufacturing capabilities. Armstrong World's launch of Sustain, in the spring of 2017,  was a major step in reinforcing its presence in the Mineral Fiber category.

Further, the introduction of Total Acoustics in 2016 has strengthened the company's leadership position at the high-end of the Mineral Fiber segment. These launches have witnessed extraordinary rates of adoption by architects, and the company anticipates the penetration of these products to continue through 2018 and beyond.

Restructuring Efforts to Fuel Margins

In 2017, Armstrong World took steps to optimize manufacturing footprint and overall cost structure. In November, the company announced its intention to close the St. Helens plant and open a distribution center near Phoenix in order to provide better service to its West Coast customers.

It has also planned to restructure the G&A profile to serve an Americas-focused business. These actions will yield cost savings in the range of $15-$20 million by the end of 2019. Further, these will propel EBITDA growth in the second half of 2018 and the company anticipates delivering $400 million of adjusted EBITDA in 2019.

Acquisitions to Augment Growth

The company recently acquired the business and assets of Plasterform, Inc. The buyout bolstered Armstrong World's interior accent capabilities.

In January 2017, the company concluded the buyout of Tectum, which accelerated its penetration into specialty ceilings and walls. Throughout the year, its team integrated Tectum into the Armstrong platform, and the results have exceeded expectations.

Now having fully integrated the business, the company can begin making modest capital investments to further enhance capabilities and profitability in this product line. Moreover, continued sales leverage and capital investments at Tectum will enable its Architectural Specialty business to expand margins in 2018 and beyond.

Share Price Performance

Armstrong World has outperformed its industry with respect to price performance over the past year. The stock has appreciated around 42.7%, while the industry has recorded growth of 19.1%.

Zacks Rank & Other Stocks to Consider

Armstrong World carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same sector are Patrick Industries, Inc. PATK , United Rentals, Inc. URI and Simpson Manufacturing Co., Inc. SSD . While Patrick Industries and United Rentals sport a Zacks Rank #1 (Strong Buy), Simpson Manufacturing carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Patrick Industries has a long-term earnings growth rate of 12.7%. The stock has gained 19% in a year's time.

United Rentals has a long-term earnings growth rate of 18.5%. The company's shares have appreciated 56% during the past year.

Simpson Manufacturing has a long-term earnings growth rate of 5%. Its shares have rallied 52%, over the past year.

Wall Street's Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It's a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

United Rentals, Inc. (URI): Free Stock Analysis Report

Simpson Manufacturing Company, Inc. (SSD): Free Stock Analysis Report

Armstrong World Industries, Inc. (AWI): Free Stock Analysis Report

Patrick Industries, Inc. (PATK): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: URI , SSD , AWI , PATK



More from Zacks.com

Subscribe






Zacks.com
Contributor:

Zacks.com

Equity Research










Research Brokers before you trade

Want to trade FX?