Apogee Enterprises (APOG) Up 9% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Apogee Enterprises (APOG). Shares have added about 9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Apogee Enterprises 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.

Apogee’s Earnings Surpass Estimates In Q2, Up Y/Y

Apogee reported second-quarter fiscal 2021 (ended Aug 29, 2020) adjusted earnings per share of 73 cents, surpassing the Zacks Consensus Estimate of 34 cents. The company had reported adjusted earnings of 72 cents per share in the prior-year quarter.

Including one-time items, the company delivered earnings per share of 67 cents compared with the 72 cents recorded in the year-ago quarter.

Apogee generated revenues of $319 million during the quarter, marking a year-over-year decline of 11% on lower volumes across all of the company’s segments due to the coronavirus pandemic.

Operational Update

Cost of sales in the fiscal second quarter was down 10% year over year to $243 million. Gross profit declined 12% year over year to $76 million. Gross margin came in at 24%, flat year over year.

Selling, general and administrative (SG&A) expenses decreased 10% year over year to $53 million. Adjusted operating income was down 7% year over year to $26 million. Operating margin in the reported quarter was 8.2% compared with the prior-year quarter’s 7.8%.

Segment Performance

In the fiscal second quarter, revenues in the Architectural Framing Systems segment slid 18% year over year to $153 million on lower order volume and COVID-19-related project delays. The segment’s operating income dipped 25% year over year to around $12 million.

Revenues in the Architectural Glass Systems segment dropped 13% year on year to $87 million, reflecting dismal volumes due to the pandemic-induced project delays as well as lower order volume. The segment reported an operating profit of $5 million compared with the year-ago quarter’s $6.5 million. This decline resulted from lower volume, partly offset by strong factory productivity and effective cost management.

Revenues in the Architectural Services segment increased 20% year over year to $74 million, as the segment executed projects in its substantial backlog. The segment’s operating profit jumped 65% year over year to $6.6 million on solid strong project execution and prudent cost management.

Revenues in the Large-Scale Optical Technologies segment declined 19% year over year to $17 million on lower volumes. By the end of the fiscal second quarter, the segment’s customers had largely reopened, after being closed for most of the fiscal first quarter due to pandemic-related restrictions. In addition, the segment’s two primary manufacturing locations resumed operations during the quarter, after being shut for most of the fiscal first and second quarters. The segment reported an operating profit of $2 million in the fiscal second quarter compared with the prior-year quarter’s $5 million, reflecting lower volume.

Backlog

The Architectural Services segment’s backlog decreased to $665 million compared with the record level of $685 million seen in the last quarter. Backlog in the Architectural Framing segment amounted to $404 million, down 4.5% from the prior quarter.

Financial Position

Apogee had cash and cash equivalents of $19 million at the end of the fiscal second quarter compared with the $19.4 million witnessed at the end of prior-year quarter. Cash generated from operating activities were $85 million in the six-month period ended as of Aug 29, 2020 compared with the year-ago quarter’s $18 million. Long-term debt was around $16 million as of Aug 29, 2020 compared with $213 million as of Feb 29, 2020. Over the past year, Apogee has reduced its total debt by $105 million.

Fiscal year to date, Apogee has returned $14.5 million of cash to shareholders through dividend payments and repurchases.

Fiscal 2021 Guidance

Given the coronavirus pandemic-related uncertainties in the end markets and economy, Apogee has not issued any financial guidance for fiscal 2021. Despite continued project delays and soft market conditions, the company anticipates improved revenues and earnings in the second half of fiscal 2021 compared with the first half of the fiscal year.


How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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