Yahoo Finance Backlog Growth to Aid Apogee (APOG) Amid Supply-Chain Woes
Apogee Enterprises, Inc. APOG has been benefiting from strong backlog growth despite inflationary pressures and supply-chain disruptions. Strength in the Architectural Framing Systems segment is aiding the company’s performance.
Apogee’s efforts to cut costs, and improve productivity and efficiency are also driving margins. Aided by its strong project pipeline and order trends, the company expects backlog growth in fiscal 2024.
Strong Segmental Results to Aid Growth
Apogee’s Architectural Framing Systems segment continues to witness solid year-over-year growth and margin expansion despite significant supply-chain and inflation headwinds due to pricing actions and the benefits of completed restructuring and cost-saving actions. The segment’s backlog was $243 million at the end of the fourth quarter of fiscal 2023. The Architectural Services segment's backlog was $727 million at the end of the fourth quarter of fiscal 2023.
The Architectural Glass segment is gaining on improved pricing and product mix, which reflect the company’s strategic shift toward more premium products. The segment is also benefiting from improved sales mix and productivity gains from its Lean program and higher pricing that helped offset inflation.
Backed by its strong project pipeline and improving order trends, the company expects backlog growth in fiscal 2024. Apogee expects adjusted earnings per share between $3.90 and $4.25 for fiscal 2024. The mid-point of the guidance indicates 2% year-over-year growth. In fiscal 2023, the company reported an adjusted EPS of $3.98.
Effective Strategic Actions
Following a detailed strategic 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.
In fiscal 2023, ROIC hit 13.8%, surpassing the company's goal. The operating margin rose to 8.7%, making significant progress toward the 10%+ target after only a year of the three-year plan.
Solid Balance Sheet Bodes Well
The company’s solid liquidity position, coupled with strong free cash flow, places it well to drive growth. Apogee returned $94 million in cash to shareholders through share repurchases and dividend payouts in fiscal 2023.
APOG has no significant debt maturities until 2027. Total debt was $170 million at the end of the fourth quarter of fiscal 2023. The company will continue to evaluate future share repurchases, considering cash flow, debt levels, market conditions and other capital allocation options.
High Costs & Supply-Chain Issues Continue to Hurt Margins
Apogee anticipates inflationary pressures to persist in fiscal 2024. Apart from this, Apogee is bearing the brunt of supply-chain disruptions. Labor constraints at some of its facilities have been hindrances and may impact its production levels. Interest expenses and healthcare costs are also anticipated to be headwinds in the upcoming quarters.
Shares of this Zacks Rank #2 (Buy) company have lost 10.3% in the past year compared with the industry's fall of 2.9%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW, and Pentair plc PNR. WOR and MTW flaunt a Zacks Rank #1 (Strong Buy) at present, and PNR has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Its shares gained 23% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares gained 13% in the last year.
The Zacks Consensus Estimate for Pentair’s 2023 earnings per share is pegged at $3.66, up 3% in the past 60 days. It has a trailing four-quarter average earnings surprise of 7.2%. PNR has gained 13.9% in the last year.
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