Apogee Enterprises (APOG) Misses Q3 EPS by 2c, Miss on Revenues; Lowers FY18 EPS Outlook

December 21, 2017 6:34 AM EST

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Apogee Enterprises (NASDAQ: APOG) reported Q3 EPS of $0.90, $0.02 worse than the analyst estimate of $0.92. Revenue for the quarter came in at $356.5 million versus the consensus estimate of $373.35 million.

FY18 OUTLOOK“We are lowering our guidance for full-year fiscal 2018 due to lower than expected volume and pricing, primarily in architectural glass, and higher than expected health care costs. In addition, our outlook now reflects charges that will result from a fourth-quarter restructuring that leverages investments we have made that improve efficiency,” said Puishys.

“The revised fiscal 2018 outlook reflects a slower than expected second half for our architectural glass segment. Delays related to the Florida hurricane are moving $8 to $10 million in revenues . . . split between our fiscal 2018 third and fourth quarters . . . into fiscal 2019. Top and bottom lines in architectural glass are also being impacted by competitive pressures,” he said. “Although our architectural glass business is facing increased competition, investments we’ve made in this business position it to maintain its leadership position and deliver solid results.

“We are executing strategies to diversify and strengthen our business, including growth strategies around new geographies, products and markets, and productivity initiatives driven by Lean and automation,” said Puishys. “In the fourth quarter, we are taking actions to reduce costs . . . actions that can be executed due to investments in capability and automation that have improved productivity and, ultimately, increased capacity. We expect to incur approximately $4.5 million for these restructuring projects, which we anticipate will yield approximately $4 million in annual savings in fiscal 2019 and beyond.

“Looking ahead, in fiscal 2019, we continue to anticipate double-digit revenue growth and triple-digit basis-point improvement in operating margin,” he said. “We are generating considerable momentum as we transform Apogee into a business dominated by our fast growing architectural framing systems segment, with architectural services poised for growth, and architectural glass and large-scale optical delivering significant operating income.

“We see continued solid U.S. commercial construction markets, with growth through at least our fiscal 2020, based on internal visibility that includes a healthy backlog and pipeline of projects that we’re bidding, as well as positive external market metrics,” said Puishys.

Apogee’s outlook for full-year fiscal 2018, which does not include the impact of pending tax law changes, is:

Revenue growth of approximately 20 percent, which reflects $8 to $10 million of hurricane impacted revenues that will move into fiscal 2019; the previous outlook was for 24 to 26 percent growth.

Operating margin of 8.6 to 8.9 percent, which includes approximately $4.5 million of expected fourth-quarter restructuring charges; the previous outlook was for a 10.0 to 10.5 percent operating margin.

Adjusted operating margin of 10.1 to 10.4 percent, which excludes the planned restructuring charges in addition to the acquisition-related items; the previous outlook was for an 11.0 to 11.5 percent adjusted operating margin.

Earnings of $2.58 to $2.68 per diluted share, which include approximately $0.11 per share of expected fourth-quarter restructuring charges; the previous EPS outlook was for $3.05 to $3.25.

Adjusted EPS of $3.04 to $3.14; the previous adjusted EPS outlook was for $3.40 to $3.60.

Adjusted earnings guidance excludes the after-tax impact of:

Amortization of short-lived acquired intangibles associated with the acquired backlog of Sotawall and EFCO of $7.0 million ($0.24 per diluted share).
Acquisition-related costs for EFCO of $3.1 million ($0.11 per diluted share).
Planned fourth-quarter restructuring charges of $3.0 million ($0.11 per diluted share).

Capital expenditures of $55 to $60 million; the previous outlook was for $60 million in capital expenditures.

GUIDANCE:

Apogee Enterprises sees FY2018 EPS of $3.04 to $3.14.

For earnings history and earnings-related data on Apogee Enterprises (APOG) click here.



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