Armstrong World Buys Moz, Expands Ceiling & Wall Business

Armstrong World Industries, Inc. AWI has acquired a designer and fabricator of custom architectural metal ceilings, walls, dividers and column covers — Moz Designs, Inc. — to expand its leading portfolio of metal ceiling and wall solutions.

CEO of Armstrong World, Vic Grizzle said, “The metal category has been a growing category for us and with the renewed interest in cleanable surfaces and partitions offers even greater opportunity.”

As a wholly-owned subsidiary of Armstrong World, Moz will maintain its name and brand. Also, it will sustain the current organizational structure, employees and independent sales representatives. Meanwhile, the financial terms of the deal are not yet disclosed.

An Introduction to Moz

Moz — which was founded by two brothers in Berkeley, CA — operates as a 100% solar-powered, 30,000 sq. ft. facility in Oakland. Its team produces rich and artistic interior as well as exterior visuals that combine custom perforations, engraving, high-end metal finishes and forming with the help of visionary architects and designers.

Moz generates annual revenues of approximately $10 million. Recently, it launched a new line of standard acrylic dividers that are durable and easy to clean. Notably, these dividers provide quick and affordable transformation of open floors to safe and separate spaces.

It’s easy-to-clean and sustainable products are mostly made up of aluminum, one of the most imperishable materials in the world, which can be infinitely recycled and reused, making the products cost effective.

Expansion Through Acquisitions

Acquisitions have been a preferred mode of the company’s expansion strategy. On Jun 28, 2020, it announced the acquisition of Turf Design, Inc. — a Chicago-based commercial interiors design house, and maker of custom felt ceiling as well as wall solutions. This buyout strengthened the company’s design and manufacturing capabilities, as well as broadened the extensive portfolio of architectural specialties ceiling and wall solutions.

Moreover in 2019, it acquired MRK Industries, a manufacturer of specialty metal ceilings and walls, as well as Architectural Components Group, Inc., a leading custom wood ceilings and walls solution provider.

Our Take

Over the past three months, Armstrong World’s shares have gained 2.2% compared with the industry’s 23.4% rally. The company has been grappling with significant market volatility owing to the COVID-19 outbreak. Its second-quarter adjusted earnings and sales declined 40.6% and 25.3%, respectively, from a year ago, mainly due to lower volumes in both Mineral Fiber and Architectural Specialties segments, thanks to COVID-19-induced lower market demand.

The volume decline was mainly attributable to government shutdowns, project delays and distributor inventory reductions. Furthermore, the company expects 2020 sales and EPS to be down 10-18% and 20-35%, respectively, due to persistently low volume.

We believe the current market volatility will continue to hurt its volume. Nonetheless, the recent buyout aligns perfectly with the company’s innovative commercial and residential ceiling, wall and suspension system solutions, and thereby helps it offset these headwinds to some extent.

Zacks Rank

Armstrong World — which shares space with TopBuild Corp. BLD, Owens Corning OC and Masco Corporation MAS in the same industry — currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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