Armstrong World (AWI) Q2 Earnings Miss Estimates, Up Y/Y

Armstrong World Industries, Inc. AWI reported adjusted earnings of $1.01 per share in second-quarter 2018, missing the Zacks Consensus Estimates of $1.04 by 2.9%. However, the reported figure increased from 87 cents per share in the prior-year quarter.

Net sales of $248.6 million surpassed the consensus estimate of $246 million by 1.1%. Also, net sales increased 10.2% year over year, driven by higher Mineral Fiber and Architectural Specialties volumes and greater average unit values ("AUV") in the Mineral Fiber segment.

Including one-time items, Armstrong reported earnings per share of 90 cents compared with 81 cents a year ago.

Operational Update

Cost of sales grew 18.2% to $165.9 million from $140.4 million in the prior-year quarter. Gross profit declined 2.9% to $82.7 million in the reported quarter from $85.2 million in the year-ago quarter. Selling, general and administrative (SG&A) expenses increased 14.6% year over year to $40.9 million. Operating income decreased 4.6% year over year to $66 million due to higher depreciation (associated with closure of the St. Helens facility) as well as manufacturing and input costs. However, these factors were offset by positive Mineral Fiber AUV and volume growth in both the Mineral Fiber and Architectural Specialties segments.

Adjusted EBITDA improved 12.2% year over year to $95 million, driven by volume growth in both Mineral Fiber and Architectural Specialties businesses, solid AUV and higher equity earnings from WAVE. However, these factors were partially offset by higher SG&A expenses, as well as increased manufacturing and input costs.

Armstrong World Industries, Inc. Price, Consensus and EPS Surprise
 

Armstrong World Industries, Inc. Price, Consensus and EPS Surprise | Armstrong World Industries, Inc. Quote

Segment Performance

Mineral Fiber: Net sales at the segment climbed 8.7% year over year to $206.7 million from $190.1 million in the prior-year quarter. Operating income dipped 7.2% to $59.5 million in the quarter from $64.1 million reported in the prior-year quarter.

Architectural Specialties: The segment’s sales increased 18% year over year to $41.9 million from $35.5 million recorded in the year-ago quarter. The segment’s operating profit rose 6.2% year over year to $8.6 million from $8.1 million in the prior-year quarter.

Financials

Armstrong World reported cash and cash equivalents of $139 million at the end of the current quarter compared with $79.7 million at the end of the prior-year quarter.

Net cash flow provided by operations was $63 million in the reported quarter compared with $32 million recorded in the year-earlier quarter.

Outlook

For 2018, Armstrong World reaffirmed its net sales growth outlook at 5-7%, adjusted EBITDA growth of 10% and free cash flow improvement of 20-30%. The company repurchased $105 million shares in the first half of 2018. Since the inception of the repurchase program in 2016, Armstrong World bought back 4.7 million shares at an average share price of $48.34.

Share Price Performance

Armstrong World has outperformed its industry so far this year. The stock has gained around 12.1% against its industry’s decline of 9.7% in the said period.

 

Zacks Rank & Other Stocks to Consider

Armstrong World currently has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the same industry include NCI Building Systems, Inc. NCS, PGT Innovations, Inc. PGTI, and Gibraltar Industries, Inc. ROCK. While NCI Building Systems and PGT Innovations sport a Zacks Rank #1 (Strong Buy), Gibraltar Industries carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NCI Building Systems has an expected current-year earnings growth rate of 77.5%.

PGT Innovations’ expected 2018 earnings growth rate is 60.67%.

Gibraltar Industries is expected to register an EPS growth rate of 22.2% this year.

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