Apogee Beats Estimates, Ups Guidance - Analyst Blog

Apogee Enterprises, Inc. ( APOG ) delivered third quarter fiscal 2013 earnings of 28 cents per share, up 40% from 20 cents per share earned in the prior-year quarter and ahead of the Zacks Consensus Estimate of 24 cents per share.

Total revenue improved 9% year over year to $190 million in the quarter and surpassed the Zacks Consensus Estimate of $184 million. The improvement was driven by growth in the Architectural segment, somewhat offset by a decline in the Large-Scale Optical Technologies segment.

Operational Update

Cost of sales increased 6% to $148 million in the quarter. Gross profit improved 22% to $42.2 million. Gross margin in the quarter improved 230 basis points to 22.2%.

SG&A expenses increased 12% to $30.8 million. Operating income was $11.4 million, up 59% from the $7.1 million in the year-ago quarter.

Segment Performance

Revenues from the Architectural Products and Services segment rose 11% year over year to $168.8 million, led by solid performance of installation business.

Operating income in the quarter was $5.8 million, a stellar improvement from $0.6 million in the year ago quarter, The improvement was driven by higher pricing of architectural glass; increased margins in the installation businesses along with better mix and good operation performance throughout the segment. Backlog in the segment was $300 million compared with $225 million in the year-ago quarter.

Large-Scale Optical Technologies segment's revenues went down 5% to $21.6 million. Operating income in the reported quarter dipped 12% to $6.5 million, impacted by timing of customer promotions and Hurricane Sandy.

Financial Position

Apogee ended the quarter with cash and short-term investments of $75 million, compared to $68.3 million at the second quarter end. Long-term debt amounted to $30.8 million, flat compared with the second quarter. Cash provided by operating activities was $23 million during the first nine months of fiscal 2013 compared to cash used amounting to $4.7 million in the comparable period last year.

Looking Ahead

For fiscal 2013, Apogee has increased its earnings guidance to the range of 62 cents to 67 cents per share from the previous guidance of 56 cents to 64 cents. It expects revenue growth in the range of 5% to 6% and improved margins resulting from better mix and good operational performance.

Further, the company expects to generate positive free cash flow after spending $30 million to improve productivity and capacity, besides introducing new products along with maintaining the requirements.

Our Take

The company has significant exposure to the U.S. market in the installation and storefront businesses and is focusing on further expansion to gain market share. The strategy of increasing its domestic geographical footprint will help revenues increase moving forward.

The architectural segment returned to profitability in the second quarter and maintained the momentum in the third quarter as well. Moreover, the segment's backlog has reached its maximum level in 13 quarters, which bodes well for its future performance.

However, macroeconomic conditions might be a headwind for Apogee in fiscal 2013. Moderating global economic growth and uncertainty in the global economic scenario can limit Apogee's near-term revenue visibility. Apogee retains a short-term Zacks #3 Rank (Hold).

Apogee Enterprises is a leader in technologies for the design and development of value added glass products, services, and systems. The company presently has two reportable segments - The Architectural segment and the Large-Scale Optical Technologies segment. Owens-Illinois, Inc. ( OI ) is a Zacks #3 Rank (Hold) stock in the same industry.

APOGEE ENTRPRS (APOG): Free Stock Analysis Report

OWENS-ILLINOIS (OI): Free Stock Analysis Report

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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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