Apogee's Fiscal 2013 Earnings Triple - Analyst Blog

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Apogee Enterprises, Inc. ( APOG ) delivered fourth-quarter fiscal 2013 earnings of 15 cents per share, up 36% from 11 cents per share earned in the prior-year quarter but falling short of the Zacks Consensus Estimate of 19 cents per share.

Total revenue improved 6% year over year to $179.7 million in the quarter but missed the Zacks Consensus Estimate of $185 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 goods sold increased 6% to $143 million in the quarter. Gross profit improved 11% to $36.3 million. Gross margin in the quarter improved 80 basis points to 20.2%. SG&A expenses inched up 1% to $30.1 million. Operating income was $6.1 million, more than double of $2.8 million earned in the year-ago quarter.

Segment Performance

Revenues from the Architectural Products and Services segment rose 9% year over year to $160.3 million, led by solid performance of installation, window and architectural glass businesses. Operating income in the quarter was $2.2 million, a stellar improvement from loss of $0.5 million in the year-ago quarter. The improvement was driven by higher pricing of architectural glass and increased margins in the installation business. Backlog in the segment was $297 million, up 25% from $237.0 million in the prior-year quarter.

Large-Scale Optical Technologies segment's revenues went down 9% to $19.5 million. Operating income in the reported quarter remained flat at $4 million.

Fiscal 2013 Performance

Apogee's fiscal 2013 earnings per share more than tripled to 67 cents from 17 cents in the prior year. Revenues increased 6% to $700 million in the year.

Financial Position

Apogee ended the year with cash and short-term investments of $85.6 million, compared with $79.3 million at fiscal 2012 end. Long-term debt amounted to $20.7 million, in line with the fiscal 2012 end. Cash provided by operating activities was $40.7 million during fiscal 2013 compared to $28 million in fiscal 2012.

Looking Ahead

For fiscal 2013, Apogee expects earnings to lie in the range of 90 cents to $1.00 per share on the back of high single-digit revenue growth. Gross margin is anticipated to be at least 22% in fiscal 2014. Geographic growth in the domestic markets, introduction of new strong architectural glass pricing and mix and improving installation margins are expected to contribute to revenue growth. Furthermore, Apogee's productivity initiatives are expected to generate 50 to 100 basis points of margin improvement.

Capital spending for fiscal 2014 is projected in the range of $40 to $45 million as Apogee continues to invest in growth, productivity and product development capabilities, including the new architectural glass coater.

Apogee has set a benchmark of $1 billion in revenues by the end of fiscal 2016. Apogee also expected to achieve 10% operating margins through its focus on productivity and operational improvements.

Our Take

The architectural segment returned to profitability in the second quarter of 2013 and maintained the momentum since then. Moreover, the segment's backlog remains strong, which bodes well for its future performance. The company intends to add new capacities as well as to fund acquisitions. Focus on operational improvements, expansion in new geographies and markets, new product launches will fuel Apogee's revenue growth going forward.

Apogee has faced challenging commercial construction market conditions so far. However, the U.S. construction is finally stabilizing and is on the road to a much-awaited recovery, which looks promising for Apogee.

However, macroeconomic conditions might continue to be a headwind for Apogee. Moderating global economic growth and uncertainty in the global economic scenario can limit Apogee's near-term revenue visibility.

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.

Apogee retains a Zacks Rank #3 (Hold). Other stocks in the same industrial products sector with favorable Zacks Ranks are Valmont Industries, Inc. ( VMI ) - Zacks Rank #1 (Strong Buy), Kaydon Corporation ( KDN ) - Zacks Rank #2 (Buy) and Worthington Industries ( WOR ) - Zacks Rank #2 (Buy).

APOGEE ENTRPRS (APOG): Free Stock Analysis Report

KAYDON CORP (KDN): Free Stock Analysis Report

VALMONT INDS (VMI): Free Stock Analysis Report

WORTHINGTON IND (WOR): 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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