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Why Is Armstrong World Industries (AWI) Down 6.1% Since Last Earnings Report?
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A month has gone by since the last earnings report for Armstrong World Industries (AWI - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Armstrong World Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Armstrong World reported mixed results for second-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate, but net sales missed the same. Both metrics increased on a year-over-year basis.
The upside was backed by robust growth in operating income and adjusted EBITDA, as well as expanded margins, fueled by positive performances from both the Mineral Fiber and Architectural Specialties segments. The company remain focused on advancing digital and healthy spaces initiatives and pursuing attractive, bolt-on acquisitions.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.38 per share, which topped the Zacks Consensus Estimate of $1.31 by 5.3% and grew 7% year over year from $1.29 per share.
Net sales of $325.4 million missed the consensus mark of $338.5 million by 3.9% but increased 1.4% year over year. The upside was driven by primarily higher volumes and favorable average unit value (AUV).
During the quarter, the company’s operating income of $87 million rose 21.1% from the prior-year quarter’s level of $71.6 million, primarily driven by the strong AUV performance, reduced acquisition-related charges, and a notable rise in equity earnings from the Worthington Armstrong Joint Venture (WAVE). Operating margin rose 440 basis points (bps) from the prior-year quarter to 26.7%. Adjusted EBITDA rose 9.8% from the prior-year quarter’s figure to $111 million. Adjusted EBITDA margin rose 260bps from the prior-year quarter to 34.2%.
Segmental Performance
Mineral Fiber: The segment’s sales fell 0.2% on a year-over-year basis to $234 million. Volumes declined due to softer market demand. Operating margin rose 190bps from the prior-year quarter’s levels to 32.3%. Adjusted EBITDA increased 6.7% from the prior-year quarter’s figure to $95 million. Adjusted EBITDA margin also rose 260 bps during the quarter.
Architectural Specialties: Net sales in the segment increased 5.7% year over year to $91.4 million, owing to broad-based growth across most product categories and favourable project mix. The segment reported an operating income of $12.2 million compared with year-ago quarter’s reported value of $1.1 million. Adjusted EBITDA increased 30.8% to $17 million from the prior-year quarter’s levels. Operating margin and adjusted EBITDA margin expanded 1,200 and 360 bps, respectively.
Financials
As of Jun 30, 2023, Armstrong World had cash and cash equivalents of $101.6 million compared with $106 million at 2022-end. Net cash provided by operations was $93.9 million in first half of 2023 compared with $63.1 million in the year-ago period. Adjusted free cash flow was $73 million in second-quarter 2023, up from $45 million reported in the year-ago quarter.
During the reported quarter, AWI repurchased 0.4 million shares of common stock for $30 million, excluding commissions and taxes. As of Jun 30, $292 million shares were remaining under the current authorized share repurchase program. On Jul 18, the board of directors authorized an additional $500-million shares (through December 2026) to be added to the remaining authorization.
Acquired BOK Modern
In July 2023, the company completed the acquisition of BOK Modern, LLC for a total cash consideration of $13.8 million, with additional contingent consideration based on performance objectives through 2025. BOK Modern is a prominent California-based designer of metal architectural solutions, having generated revenues of around $12 million in 2022.
2023 Guidance Updated
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid first-half results and strong execution at the plants, operational efficiencies and cost-saving initiatives.
A modest update to the full-year 2023 outlook reflects its confidence in achieving the annual goals. AWI now anticipates net sales within $1,265-$1,305 million (slightly up from $1,260-$1,310 million expected earlier), indicating a 3-6% increase from the year-ago figure.
Adjusted EBITDA is now projected within $400-$420 million, suggesting a rise of 4-9% year over year. Earlier it expected $395-$420 million of adjusted EBITDA for 2023. AWI rose its adjusted earnings per share expectation to $4.85-$5.05 from $4.80-$5.05 estimated earlier, suggesting a growth of 2-7% from 2022.
Adjusted free cash flow is anticipated between $240 million and $250 million (versus previous anticipation of $230-$250 million), indicating a 9-13% increase from the prior year’s levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Armstrong World Industries has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Armstrong World Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Armstrong World Industries (AWI) Down 6.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Armstrong World Industries (AWI - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Armstrong World Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Armstrong World's Q2 Earnings Top, Margins Rise Y/Y
Armstrong World reported mixed results for second-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate, but net sales missed the same. Both metrics increased on a year-over-year basis.
The upside was backed by robust growth in operating income and adjusted EBITDA, as well as expanded margins, fueled by positive performances from both the Mineral Fiber and Architectural Specialties segments. The company remain focused on advancing digital and healthy spaces initiatives and pursuing attractive, bolt-on acquisitions.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.38 per share, which topped the Zacks Consensus Estimate of $1.31 by 5.3% and grew 7% year over year from $1.29 per share.
Net sales of $325.4 million missed the consensus mark of $338.5 million by 3.9% but increased 1.4% year over year. The upside was driven by primarily higher volumes and favorable average unit value (AUV).
During the quarter, the company’s operating income of $87 million rose 21.1% from the prior-year quarter’s level of $71.6 million, primarily driven by the strong AUV performance, reduced acquisition-related charges, and a notable rise in equity earnings from the Worthington Armstrong Joint Venture (WAVE). Operating margin rose 440 basis points (bps) from the prior-year quarter to 26.7%. Adjusted EBITDA rose 9.8% from the prior-year quarter’s figure to $111 million. Adjusted EBITDA margin rose 260bps from the prior-year quarter to 34.2%.
Segmental Performance
Mineral Fiber: The segment’s sales fell 0.2% on a year-over-year basis to $234 million. Volumes declined due to softer market demand. Operating margin rose 190bps from the prior-year quarter’s levels to 32.3%. Adjusted EBITDA increased 6.7% from the prior-year quarter’s figure to $95 million. Adjusted EBITDA margin also rose 260 bps during the quarter.
Architectural Specialties: Net sales in the segment increased 5.7% year over year to $91.4 million, owing to broad-based growth across most product categories and favourable project mix. The segment reported an operating income of $12.2 million compared with year-ago quarter’s reported value of $1.1 million. Adjusted EBITDA increased 30.8% to $17 million from the prior-year quarter’s levels. Operating margin and adjusted EBITDA margin expanded 1,200 and 360 bps, respectively.
Financials
As of Jun 30, 2023, Armstrong World had cash and cash equivalents of $101.6 million compared with $106 million at 2022-end. Net cash provided by operations was $93.9 million in first half of 2023 compared with $63.1 million in the year-ago period. Adjusted free cash flow was $73 million in second-quarter 2023, up from $45 million reported in the year-ago quarter.
During the reported quarter, AWI repurchased 0.4 million shares of common stock for $30 million, excluding commissions and taxes. As of Jun 30, $292 million shares were remaining under the current authorized share repurchase program. On Jul 18, the board of directors authorized an additional $500-million shares (through December 2026) to be added to the remaining authorization.
Acquired BOK Modern
In July 2023, the company completed the acquisition of BOK Modern, LLC for a total cash consideration of $13.8 million, with additional contingent consideration based on performance objectives through 2025. BOK Modern is a prominent California-based designer of metal architectural solutions, having generated revenues of around $12 million in 2022.
2023 Guidance Updated
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid first-half results and strong execution at the plants, operational efficiencies and cost-saving initiatives.
A modest update to the full-year 2023 outlook reflects its confidence in achieving the annual goals. AWI now anticipates net sales within $1,265-$1,305 million (slightly up from $1,260-$1,310 million expected earlier), indicating a 3-6% increase from the year-ago figure.
Adjusted EBITDA is now projected within $400-$420 million, suggesting a rise of 4-9% year over year. Earlier it expected $395-$420 million of adjusted EBITDA for 2023. AWI rose its adjusted earnings per share expectation to $4.85-$5.05 from $4.80-$5.05 estimated earlier, suggesting a growth of 2-7% from 2022.
Adjusted free cash flow is anticipated between $240 million and $250 million (versus previous anticipation of $230-$250 million), indicating a 9-13% increase from the prior year’s levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Armstrong World Industries has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Armstrong World Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.