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Should You Dump Apogee (APOG) on Near-Term Headwinds?

On Dec 22, 2015, we issued an updated research report on Apogee Enterprises, Inc.APOG . The company's performance is likely to be affected by the continuing foreign currency impact, lower volumes in international operations as well as delay in certain project timings. The contracting architectural market remains another headwind for Apogee.

Notably, Apogee's revenues declined 2.5% year over year in the third quarter of fiscal 2016. The company slashed its revenue growth guidance to mid-single-digits from high-single-digits for fiscal 2016. On a segmental basis, Apogee guided revenues from architectural glass to grow in high-single-digits to low-double-digits for the full year.

In addition, Architectural framing systems is expected to witness low-to-mid single-digit growth for the year. Weak Brazilian market conditions and a slower Canadian business are the near-term headwinds. Further, construction site delays will hurt growth. The company's businesses, mainly architectural glass and windows, generally have longer lead times which result in larger production gaps. This can be held partly responsible for the delay.

Meanwhile, Apogee remains cautious about the contracting architectural market conditions. The American Institute of Architects' (AIA) Architecture Mixed Use Index, the main indicator for non-residential construction activity, reported a November score of 49.3, down from 53.1 in the previous month. This score reflects a decrease in design services.

Further, Apogee's large scale optical segment revenues declined 5% year over year in the third quarter due to a shift in the timing of customer orders. The company expects large-scale optical to grow in low-single-digits in fiscal 2016. Furthermore, the segment depends on the strength of the retail picture framing market, which in turn is highly dependent on consumer confidence and the condition of the U.S. economy.

Naturally, we are not optimistic about the prospects that the stock faces. As a result, this Zacks Rank #4 (Sell) stock has witnessed downward estimate revisions over the last 30 days. The Zacks Consensus Estimate for fiscal 2017 decreased roughly 5.8% to $2.78 per share.

Stocks that Warrant a Look

Some better-ranked stocks in the same space include Franklin Electric Co., Inc. FELE , John Bean Technologies Corporation JBT and Lakeland Industries Inc. LAKE . All these stocks carry a Zacks Rank #2 (Buy).

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APOGEE ENTRPRS (APOG): Free Stock Analysis Report

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LAKELAND INDS (LAKE): Free Stock Analysis Report

JOHN BEAN TECH (JBT): 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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