Armstrong World (AWI) Q4 Earnings Lag Estimates, Up Y/Y

Armstrong World Industries, Inc. AWI posted adjusted earnings of 50 cents per share in fourth-quarter 2017, which increased 22% year over year. However, earnings missed the Zacks Consensus Estimate of 66 cents.
 

Including one-time items, the company reported earnings per share of $1.92 compared with 33 cents recorded in the prior-year quarter.

Operational Update

Net sales increased 9% year over year to $214.3 million. Growth was led by the Architectural Specialties segment followed by the Mineral Fiber segment as well as higher average unit values (“AUV”). Nevertheless, revenues fell short of the Zacks Consensus Estimate of $317.5 million.

 

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

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

Armstrong World Industries, Inc. price-consensus-eps-surprise-chart | Armstrong World Industries, Inc. Quote

Cost of sales climbed 15% year over year to $148 million. Gross profit edged down 3% to $66.5 million in the reported quarter. Selling, general and administrative (SG&A) expenses declined 30% year over year to $30 million.

Adjusted operating income improved 42% year over year to $37 million aided by SG&A savings, volume growth, positive AUV and net environmental insurance recoveries. However, these factors were offset by higher manufacturing and input costs and costs related to the announced closing the St. Helens plant. Adjusted EBITDA improved 10% year over year to $65 million driven by improvements in AUV and higher volumes.

Segment Performance

In connection to the company’s agreement to divest its EMEA (Europe, the Middle East and Africa) and Pacific Rim businesses, these have been excluded from the results of continuing operations. With effect from Dec 31, 2017, Armstrong World’s operating segments are as follows — Mineral Fiber, Architectural Specialties and Unallocated Corporate.
 

Mineral Fiber: Net sales at the segment grew 3% year over year to $177.6 million. Operating income increased 4% to $57 million in the fourth quarter from $55 million reported in the prior-year quarter.

Architectural Specialties: The segment’s sales were up 49% year over year to $37 million from $25 million recorded in the year-ago quarter. The segment’s operating profit doubled to $8 million from the prior-year quarter.

Financials

Armstrong World reported cash and cash equivalents of $159.6 million as of Dec 31, 2017, compared with $141.9 million as of Dec 31, 2016. The company recorded cash flow from operations of $170 million in 2017 compared with $49 million last year.
 

Fiscal 2017 Performance
 

Adjusted earnings for 2017 came in at $3.02, a 23% rise over $2.46 in 2017. Earnings beat the Zacks Consensus Estimate of $2.85. Including one-time items, the company reported earnings per share of $4.08 compared with $1.78 in 2016.
 

Net sales increased 7% year over year to $894 million but fell short of the Zacks Consensus Estimate of $1.32 billion.
 

Outlook
 

For fiscal 2018, the company guided net sales growth in the range of 5-7%, double digit EBITDA growth. This will be likely driven by the favorable macro-economic climate, improved AUV in sales, productivity savings as well as cost savings from restructuring actions in St. Helens plant and corporate back office. The company also expects growth of 20-30% in its adjusted Free Cash Flow for the year.
 

In November 2017, Armstrong World entered into an agreement to sell its EMEA and Pacific Rim businesses to Knauf, which is expected to close by the middle of 2018. The sale along with investments in advanced manufacturing will boost Armstrong’s top and bottom-lines going forward.

Share Price Performance
 

 

In the last year, Armstrong World has outperformed the industry with respect to price performance. The stock has gained around 32%, while the industry recorded growth of 17%.
 

Zacks Rank & Key Picks
 

Armstrong World currently has a Zacks Rank #4 (Sell).
 

Better-ranked stocks in the same sector are TopBuild Corp. BLD, PGT Innovations, Inc. PGTI and MasTec, Inc. MTZ. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

TopBuild Corp has delivered a positive average earnings surprise of 10.32% in the trailing four quarters. The stock has surged 75% in the past year.

 

PGT Innovations has delivered a positive average earnings surprise of 7.61% in the trailing four quarters. The stock has rallied 78% in the past year.

 

MasTec has delivered a positive average earnings surprise of 28.05% in the trailing four quarters. The stock has gained 34% in the past year.

 

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