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Why Is Armstrong World Industries (AWI) Up 15% Since Last Earnings Report?
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It has been about a month since the last earnings report for Armstrong World Industries (AWI - Free Report) . Shares have added about 15% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Armstrong World Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Armstrong World’s Q3 Earnings & Revenues Top, Up Y/Y
Armstrong World Industries reported better-than-expected results for third-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate. Also, both metrics increased on a year-over-year basis.
The company’s growth trend was backed by solid increase in operating income and adjusted EBITDA, accompanied by expanded margins. This was fueled by positive contributions from the Mineral Fiber as well as Architectural Specialties segments. Despite the challenging macroeconomic conditions, the company delivered strong results attributable to its diversified end markets, consistent Mineral Fiber average unit value (AUV) growth and appealing growth initiatives. The company states to continue investing in its growth initiatives and support its advancement along with pursuing attractive, bolt-on acquisitions.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.60 per share, which topped the Zacks Consensus Estimate of adjusted earnings of $1.30 per share by 23.1%. The metric also grew 17.6% year over year from $1.36 per share.
Net sales of $347.3 million surpassed the consensus mark of $331.2 million by 4.9% and grew 6.9% year over year. The upside was driven by strong AUV and high sales volume.
During the quarter, the company’s operating income of $100.2 million rose 36.7% from the prior-year quarter’s level of $73.3 million, primarily driven by favorable AUV performance, the marginal benefit from increased Architectural Specialties sales and lower input costs. The reported value can be compared with our model’s projection of $80.1 million, or 9.3% year-over-year growth, which is comparatively on the lower side. Operating margin expanded 630 basis points (bps) from the prior-year quarter to 28.9%. We expected the metric to be 24.3% compared with 22.6% reported in the prior year.
Adjusted EBITDA rose 19.4% from the prior-year quarter’s figure to $125 million. Adjusted EBITDA margin rose 380 bps from the prior-year quarter to 36%. Our estimate for adjusted EBITDA and adjusted EBITDA margin was $106.4 million and 32.3%, respectively.
Segmental Performance
Mineral Fiber: The segment’s net sales grew 6.8% on a year-over-year basis to $249.7 million, backed by solid AUV driven by favorable price and mix. For this segment, we expected net sales to be $229.9 million, which is a 1.6% year-over-year decline. The segment reported an operating income of $85.5 million compared with $70.8 million reported in the prior-year quarter. Operating margin rose 390 bps from the prior-year quarter’s levels to 34.2%. Adjusted EBITDA increased 17.5% from the prior-year quarter’s figure to $105 million. Adjusted EBITDA margin also rose 380 bps during the quarter to 41.9%.
Architectural Specialties: Net sales in the segment increased 6.9% year over year to $97.6 million, owing to notable growth in metal product sales and contributions from the acquisitions of GC Products, Inc. and BOK Modern, LLC. Our estimate for this segment’s net sales was pegged at $99.5 million, which is 9% year-over-year growth. The segment reported an operating income of $15.5 million, portraying a whopping 355.9% year-over-year growth. Adjusted EBITDA increased 30.1% to $20 million from the prior-year quarter’s reported value of $16 million. Operating margin and adjusted EBITDA margin expanded 1,220 and 370 bps, respectively.
Financials
As of Sep 30, 2023, Armstrong World had cash and cash equivalents of $96.6 million compared with $106 million at 2022 end. Net cash provided by operations was $176.4 million in the first nine months of 2023 compared with $119.2 million in the year-ago period. Adjusted free cash flow was $92 million in third-quarter 2023, up from $66 million reported in the year-ago quarter. During the reported quarter, Armstrong World repurchased 0.5 million shares of common stock for $40 million, excluding commissions and taxes. As of Sep 30, $752 million shares were remaining under the current authorized share repurchase program.
Updated 2023 Guidance
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid third-quarter results and strong execution at the plants, operational efficiencies and cost-saving initiatives. An update to the full-year 2023 outlook reflects its confidence in achieving its annual goals. Armstrong World now anticipates net sales to be within $1,280-$1,295 million (compared with $1,265-$1,305 million expected earlier), indicating a 4-5% increase from the year-ago figure.
Adjusted EBITDA is now projected to be within $418-$426 million, suggesting a rise of 9-11% year over year. Earlier, the company expected $400-$420 million of adjusted EBITDA for 2023. The company increased its adjusted earnings per share expectation to $5.05-$5.15 from the earlier expected $4.85-$5.05, suggesting growth of 7-9% from the 2022 reported figure. Adjusted free cash flow is anticipated to be between $245 million and $255 million (versus the previous anticipation of $240-$250 million), indicating an 11-15% increase from the prior year’s levels.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.93% due to these changes.
VGM Scores
Currently, Armstrong World Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Armstrong World Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Armstrong World Industries (AWI) Up 15% Since Last Earnings Report?
It has been about a month since the last earnings report for Armstrong World Industries (AWI - Free Report) . Shares have added about 15% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Armstrong World Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Armstrong World’s Q3 Earnings & Revenues Top, Up Y/Y
Armstrong World Industries reported better-than-expected results for third-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate. Also, both metrics increased on a year-over-year basis.
The company’s growth trend was backed by solid increase in operating income and adjusted EBITDA, accompanied by expanded margins. This was fueled by positive contributions from the Mineral Fiber as well as Architectural Specialties segments. Despite the challenging macroeconomic conditions, the company delivered strong results attributable to its diversified end markets, consistent Mineral Fiber average unit value (AUV) growth and appealing growth initiatives. The company states to continue investing in its growth initiatives and support its advancement along with pursuing attractive, bolt-on acquisitions.
Inside the Headlines
Armstrong World reported adjusted earnings of $1.60 per share, which topped the Zacks Consensus Estimate of adjusted earnings of $1.30 per share by 23.1%. The metric also grew 17.6% year over year from $1.36 per share.
Net sales of $347.3 million surpassed the consensus mark of $331.2 million by 4.9% and grew 6.9% year over year. The upside was driven by strong AUV and high sales volume.
During the quarter, the company’s operating income of $100.2 million rose 36.7% from the prior-year quarter’s level of $73.3 million, primarily driven by favorable AUV performance, the marginal benefit from increased Architectural Specialties sales and lower input costs. The reported value can be compared with our model’s projection of $80.1 million, or 9.3% year-over-year growth, which is comparatively on the lower side. Operating margin expanded 630 basis points (bps) from the prior-year quarter to 28.9%. We expected the metric to be 24.3% compared with 22.6% reported in the prior year.
Adjusted EBITDA rose 19.4% from the prior-year quarter’s figure to $125 million. Adjusted EBITDA margin rose 380 bps from the prior-year quarter to 36%. Our estimate for adjusted EBITDA and adjusted EBITDA margin was $106.4 million and 32.3%, respectively.
Segmental Performance
Mineral Fiber: The segment’s net sales grew 6.8% on a year-over-year basis to $249.7 million, backed by solid AUV driven by favorable price and mix. For this segment, we expected net sales to be $229.9 million, which is a 1.6% year-over-year decline. The segment reported an operating income of $85.5 million compared with $70.8 million reported in the prior-year quarter. Operating margin rose 390 bps from the prior-year quarter’s levels to 34.2%. Adjusted EBITDA increased 17.5% from the prior-year quarter’s figure to $105 million. Adjusted EBITDA margin also rose 380 bps during the quarter to 41.9%.
Architectural Specialties: Net sales in the segment increased 6.9% year over year to $97.6 million, owing to notable growth in metal product sales and contributions from the acquisitions of GC Products, Inc. and BOK Modern, LLC. Our estimate for this segment’s net sales was pegged at $99.5 million, which is 9% year-over-year growth. The segment reported an operating income of $15.5 million, portraying a whopping 355.9% year-over-year growth. Adjusted EBITDA increased 30.1% to $20 million from the prior-year quarter’s reported value of $16 million. Operating margin and adjusted EBITDA margin expanded 1,220 and 370 bps, respectively.
Financials
As of Sep 30, 2023, Armstrong World had cash and cash equivalents of $96.6 million compared with $106 million at 2022 end. Net cash provided by operations was $176.4 million in the first nine months of 2023 compared with $119.2 million in the year-ago period. Adjusted free cash flow was $92 million in third-quarter 2023, up from $66 million reported in the year-ago quarter. During the reported quarter, Armstrong World repurchased 0.5 million shares of common stock for $40 million, excluding commissions and taxes. As of Sep 30, $752 million shares were remaining under the current authorized share repurchase program.
Updated 2023 Guidance
The company maintains a positive outlook on its growth strategy and cash flow generation for the year, backed by solid third-quarter results and strong execution at the plants, operational efficiencies and cost-saving initiatives. An update to the full-year 2023 outlook reflects its confidence in achieving its annual goals. Armstrong World now anticipates net sales to be within $1,280-$1,295 million (compared with $1,265-$1,305 million expected earlier), indicating a 4-5% increase from the year-ago figure.
Adjusted EBITDA is now projected to be within $418-$426 million, suggesting a rise of 9-11% year over year. Earlier, the company expected $400-$420 million of adjusted EBITDA for 2023. The company increased its adjusted earnings per share expectation to $5.05-$5.15 from the earlier expected $4.85-$5.05, suggesting growth of 7-9% from the 2022 reported figure. Adjusted free cash flow is anticipated to be between $245 million and $255 million (versus the previous anticipation of $240-$250 million), indicating an 11-15% increase from the prior year’s levels.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.93% due to these changes.
VGM Scores
Currently, Armstrong World Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Armstrong World Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.