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Apogee Gains From Cost-Cutting Actions & Solid Order Trends
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Apogee Enterprises, Inc. (APOG - Free Report) has been benefiting from the strong performance of its Architectural Services segment, which is gaining from an improved pricing and product mix. The company’s strong project pipeline and recent order trends bode well.
Apogee's ongoing efforts to reduce costs and enhance productivity are expected to bolster margins in the coming quarters.
Let us dig deeper into the factors that are driving this stock.
APOG’s Solid Segmental Performances Bode Well
Apogee’s Architectural Services segment witnessed solid year-over-year growth and margin expansion in the first half of fiscal 2025 despite significant supply-chain and inflation headwinds. The segment is gaining on improved pricing and product mix, reflecting the company’s shift toward more premium products.
The Architectural Glass segment will likely benefit from an improved sales mix, productivity benefits from its Lean program and stronger pricing. This bodes well for the company.
Backed by the tailwinds, Apogee expects fiscal 2025 adjusted earnings per share (EPS) between $4.90 and $5.20, up from the previously disclosed $4.65-$5.00. The company reported an adjusted EPS of $4.77 in the year-ago quarter.
APOG’s Impressive Strategies Boost Margins
Following a detailed review of its business, the company has embarked on a plan to deliver profitable growth and improved returns. The strategy is centered on three pillars, including becoming the economic leader in its target markets, actively managing the portfolio to drive higher margins and Return on Invested Capital (ROIC), and strengthening its core capabilities to enable profitable growth.
In 2022, it announced three-year financial goals, which include ROIC greater than 12%, an operating margin greater than 10%, and revenue growth greater than 1.2 times growth of the non-residential construction market.
Backed by these initiatives, ROIC hit 16.5% in fiscal 2024, surpassing the company's goal. The operating margin rose to 10.3%, which exceeded the target of more than 10%. In the second quarter of 2024, the company reported an operating margin of 12.6%, marking the second consecutive quarter with margins above 12%.
Apogee’s Focus on Growth to Drive Results
APOG’s segments have the potential to increase market share, expand into new geographies and markets, and introduce products. Apogee has broader exposure in various projects across different sectors, including healthcare, education, and government and multifamily housing, as well as a growing renovation business. The company is witnessing strong demand from new construction activities.
Apogee continues to focus on the strategy to diversify revenue streams, explore growth opportunities, and improve the efficiency and productivity of operations to deliver stable growth and profitability.
The company has initiated several operational and commercial improvements, including cost reductions, integrated product management and pricing strategies, as well as supply-chain and operational efficiencies. These actions are likely to somewhat offset headwinds from cost inflation.
APOG recently announced that it inked an agreement with Heartwood Partners to acquire UW Interco, LLC (UW Solutions) for $240 million in cash. This transaction is consistent with Apogee's goal of adding distinctive businesses with a great operational track record to its portfolio. After completion, Apogee intends to incorporate UW Solutions into its Large-Scale Optical segment. This will establish a scalable growth platform in the specialized coatings and materials market.
Apart from this, the various government stimulus measures support the construction end markets, which bodes well for Apogee. APOG belongs to the Glass Products industry, along with O-I Glass, Inc. (OI - Free Report) .
OI reported second-quarter 2024 adjusted EPS of 44 cents, which beat the Zacks Consensus Estimate of 42 cents. On a year-over-year basis, earnings fell 50%, reflecting lower demand. Revenues were $1.73 billion for the quarter under review, down 8.5% from the year-ago quarter due to lower average selling prices, unfavorable foreign currency translation and reduced sales volume. The top line missed the Zacks Consensus Estimate of $1.75 billion. Sales volume (in tons) declined 4.5% in the quarter.
Apogee competes with construction stocks Griffon (GFF - Free Report) and Patrick Industries (PATK - Free Report) . Griffon expects revenues of $2.65 billion for 2024, indicating a year-over-year decline of 1% due to decreased commercial volume and reduced consumer demand in North America. GFF expects an adjusted EBITDA of $555 million for 2024.
Patrick Industries is well-positioned for substantial profitable growth and earnings expansion. The company's market share gains and acquisitions are expected to drive enhanced performance as end markets rebound.
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Apogee Gains From Cost-Cutting Actions & Solid Order Trends
Apogee Enterprises, Inc. (APOG - Free Report) has been benefiting from the strong performance of its Architectural Services segment, which is gaining from an improved pricing and product mix. The company’s strong project pipeline and recent order trends bode well.
Apogee's ongoing efforts to reduce costs and enhance productivity are expected to bolster margins in the coming quarters.
Let us dig deeper into the factors that are driving this stock.
APOG’s Solid Segmental Performances Bode Well
Apogee’s Architectural Services segment witnessed solid year-over-year growth and margin expansion in the first half of fiscal 2025 despite significant supply-chain and inflation headwinds. The segment is gaining on improved pricing and product mix, reflecting the company’s shift toward more premium products.
The Architectural Glass segment will likely benefit from an improved sales mix, productivity benefits from its Lean program and stronger pricing. This bodes well for the company.
Backed by the tailwinds, Apogee expects fiscal 2025 adjusted earnings per share (EPS) between $4.90 and $5.20, up from the previously disclosed $4.65-$5.00. The company reported an adjusted EPS of $4.77 in the year-ago quarter.
APOG’s Impressive Strategies Boost Margins
Following a detailed review of its business, the company has embarked on a plan to deliver profitable growth and improved returns. The strategy is centered on three pillars, including becoming the economic leader in its target markets, actively managing the portfolio to drive higher margins and Return on Invested Capital (ROIC), and strengthening its core capabilities to enable profitable growth.
In 2022, it announced three-year financial goals, which include ROIC greater than 12%, an operating margin greater than 10%, and revenue growth greater than 1.2 times growth of the non-residential construction market.
Backed by these initiatives, ROIC hit 16.5% in fiscal 2024, surpassing the company's goal. The operating margin rose to 10.3%, which exceeded the target of more than 10%. In the second quarter of 2024, the company reported an operating margin of 12.6%, marking the second consecutive quarter with margins above 12%.
Apogee’s Focus on Growth to Drive Results
APOG’s segments have the potential to increase market share, expand into new geographies and markets, and introduce products. Apogee has broader exposure in various projects across different sectors, including healthcare, education, and government and multifamily housing, as well as a growing renovation business. The company is witnessing strong demand from new construction activities.
Apogee continues to focus on the strategy to diversify revenue streams, explore growth opportunities, and improve the efficiency and productivity of operations to deliver stable growth and profitability.
The company has initiated several operational and commercial improvements, including cost reductions, integrated product management and pricing strategies, as well as supply-chain and operational efficiencies. These actions are likely to somewhat offset headwinds from cost inflation.
APOG recently announced that it inked an agreement with Heartwood Partners to acquire UW Interco, LLC (UW Solutions) for $240 million in cash. This transaction is consistent with Apogee's goal of adding distinctive businesses with a great operational track record to its portfolio. After completion, Apogee intends to incorporate UW Solutions into its Large-Scale Optical segment. This will establish a scalable growth platform in the specialized coatings and materials market.
Apart from this, the various government stimulus measures support the construction end markets, which bodes well for Apogee. APOG belongs to the Glass Products industry, along with O-I Glass, Inc. (OI - Free Report) .
OI reported second-quarter 2024 adjusted EPS of 44 cents, which beat the Zacks Consensus Estimate of 42 cents. On a year-over-year basis, earnings fell 50%, reflecting lower demand. Revenues were $1.73 billion for the quarter under review, down 8.5% from the year-ago quarter due to lower average selling prices, unfavorable foreign currency translation and reduced sales volume. The top line missed the Zacks Consensus Estimate of $1.75 billion. Sales volume (in tons) declined 4.5% in the quarter.
Apogee competes with construction stocks Griffon (GFF - Free Report) and Patrick Industries (PATK - Free Report) . Griffon expects revenues of $2.65 billion for 2024, indicating a year-over-year decline of 1% due to decreased commercial volume and reduced consumer demand in North America. GFF expects an adjusted EBITDA of $555 million for 2024.
Patrick Industries is well-positioned for substantial profitable growth and earnings expansion. The company's market share gains and acquisitions are expected to drive enhanced performance as end markets rebound.