A month has gone by since the last earnings report for Armstrong World Industries (AWI Quick QuoteAWI - Free Report) . Shares have added about 14.1% 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 its most recent earnings report in order to get a better handle on the important drivers.

Armstrong World's Q3 Earnings & Net Sales Beat Estimates, '24 View Up

Armstrong World reported solid results for third-quarter 2024, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.

The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments. Growth was attributable to the increase in average unit value (AUV) and volume. Also, contributions from recent acquisitions aided the uptrend.

Given the solid third-quarter results and improved line of sight for the full year, Armstrong World raised its 2024 guidance for adjusted EBITDA, adjusted earnings per share (EPS) and adjusted free cash flow.

AWI’s Earnings & Sales Discussion

Armstrong World reported adjusted EPS of $1.81, which topped the Zacks Consensus Estimate of $1.75 by 3.4%. The metric also grew 13.1% year over year from $1.60 per share.

Net sales of $386.6 million also surpassed the consensus mark of $385.7 million by 0.2% and increased 11.3% year over year. The upside was driven by a higher sales volume of $30 million and a favorable AUV of $9 million.

Adjusted EBITDA increased 11.2% from the year-ago quarter’s figure to $139 million. However, adjusted EBITDA margin contracted 10 bps from the year-ago quarter to 35.9%. Our estimate for adjusted EBITDA and adjusted EBITDA margin was $134.7 million and 35%, respectively.

AWI’s Segmental Performance

Mineral Fiber: The segment’s net sales grew 3.3% on a year-over-year basis to $258 million on the back of 10% growth of favorable AUV driven by positive like-for-like pricing. However, the upside was partially offset by $1 million of lower sales volumes.

The segment reported an operating income of $93 million, up 8.8% from $85.5 million in the year-ago quarter. Operating margin expanded 180 bps from the year-ago quarter’s levels to 36%. Adjusted EBITDA increased 8.2% from the year-ago quarter’s figure to $113 million. Adjusted EBITDA margin also rose 200 bps in the quarter to 43.9%.

Architectural Specialties: Net sales in the segment increased 31.8% year over year to $128.6 million, driven by a $25 million contribution from 3form and BOK and a moderate increase in custom project net sales.

The segment reported an operating income of $19.2 million, portraying a 23.9% year-over-year increase. Adjusted EBITDA for the quarter was $26 million, indicating 27.1% growth year over year. On a year-over-year basis, the operating margin and the adjusted EBITDA margin contracted 100 bps and 70 bps, respectively.

Armstrong World’s Financials

As of Sept. 30, 2024, Armstrong World had cash and cash equivalents of $73.7 million compared with $70.8 million at 2023-end.

Net cash provided by operations was $97 million in the third quarter compared with $83 million in the year-ago period. Adjusted free cash flow was $107 million, up from $92 million reported in the year-ago quarter.

During the reported quarter, the company repurchased 0.1 million shares of common stock for $15 million, excluding commissions and tax costs. As of Sept. 30, 2024, $677 million shares were remaining under the current authorized share repurchase program.

Raised 2024 Guidance of AWI

The company now anticipates net sales in the range of $1,420-$1,435 million compared with the prior expectations of $1,415-$1,440 million, indicating a 10-11% increase from the year-ago figure of $1,295 million.

Segment-wise, Mineral Fiber sales are now expected to grow around 5%, compared with 4-6% expected earlier. Architectural Specialties’ sales are anticipated to grow between 23-24% compared with the prior projection of 22-24%.

Adjusted EBITDA is now projected to be between $482 million and $490 million, up from the previously expected range of $474-$486 million, reflecting 12-14% growth from $430 million in 2023. Mineral Fiber’s adjusted EBITDA margin is now anticipated to be more than 41%, marginally up from approximately 41% expected earlier. Architectural Specialties’ adjusted EBITDA margin is still anticipated to be approximately 18%.

Armstrong World now expects adjusted EPS to increase 16-17% year over year to $6.15-$6.25 (previously expected between $6.00 and $6.15) from the reported figure of $5.32 in 2023.

Adjusted free cash flow is now anticipated to be in the range of $290-$300 million compared with a previous projection of $288-$300 million, indicating a 10-14% increase year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Armstrong World Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. It comes with little surprise Armstrong World Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.