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Apogee (APOG) Tops Q1 Earnings, Revenues; Raises View

Apogee Enterprises, Inc.APOG posted earnings per share of 61 cents in first-quarter fiscal 2017 (ended May 28, 2016) that surged 49% from earnings of 41 cents per share in the prior-year quarter. Earnings surpassed the Zacks Consensus Estimate of 47 cents.

Operational Update

The company reported total revenues of $247.9 million, which increased 3% year over year. In constant currency, revenues increased 3% year over year. Revenues beat the Zacks Consensus Estimate of $238 million.

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Cost of goods sold remained flat year over year at $184 million. Gross profit improved 16% year over year to $64 million. Gross margin also expanded 300 basis points (bps) to 26%. Selling, general and administrative (SG&A) expenses went up 2% year over year to $38 million. Operating income grew 44% year over year to $26.3 million. Operating margin grew 300 bps year over year to 10.6%.

Segment Performance

Revenues at the Architectural Glass segment went down 8% year over year to $93.4 million. Operating income in the quarter increased 15% to $9.5 million from $8.3 million in the prior-year quarter.

Revenues at the Architectural Services segment rose 13% year over year to $62.8 million. The segment reported an operating profit of $3.2 million which shot up 238% from $0.9 million in the year-ago quarter.

The Architectural Framing Systems segment's revenues increased 13% year over year to $81 million led by volume growth. In constant currency, revenues went up 14%. The segment's operating income grew 94% to $10.2 million from $5.3 million in the prior-year quarter.

The Large-Scale Optical Technologies segment's revenues were flat year over year to $20 million. Operating income in the reported quarter was $4.7 million, which fell 4% from $4.9 million in the year-ago quarter.

Financial Position

At the end of first-quarter fiscal 2017, Apogee had cash and cash equivalents of $37 million versus $28.2 million as of May 30, 2015. The company used cash of $0.9 million in operations in the three-month period ending May 28, 2016, compared with cash inflow of $20.9 million in the comparable year-ago period.

Apogee's backlog increased 8% year over year to $509.7 million at the end of the quarter. Roughly 71% or $364 million of the backlog is expected to be delivered in fiscal 2017, and the balance in fiscal 2018.

Outlook for Fiscal 2017 and Beyond

Apogee increased its earnings per share outlook for fiscal 2017 to $2.70-$2.85 from the previous guidance of $2.65-$2.80. The upbeat guidance came on the back of improved operational performance in the first quarter. The trend is expected to continue throughout the year.

Apogee expects mid-single digit U.S. commercial construction market growth in fiscal 2017, as market activity, the Architecture Billings Index, office employment and office vacancy rates witnessed positive momentum.

Apogee expects to deliver capital expenditures of approximately $60 million in fiscal 2017 as the company is investing to increase capabilities, productivity and capacity. Gross margin is anticipated to be greater than 26% and operating margin of at least 11%.

For long term, Apogee believes to grow through expanding in new geographies, new products and new markets; along with robust backlog and bidding activity. In addition, focus on better project selection, productivity and operational improvements will also drive growth. These actions will support Apogee's fiscal 2018 goals of at least a 12% operating margin on revenues of $1.2-$1.3 billion.

Apogee currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Owens-Illinois, Inc. OI , ACCO Brands Corporation ACCO and Astec Industries, Inc. ASTE . All these stocks sport a Zacks Rank #1 (Strong Buy).

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


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

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