Armstrong World (AWI) Q3 Earnings in Line, Revenues Beat
Armstrong World AWI posted adjusted earnings of 76 cents per share in third-quarter 2016 that surged around 28.8% year over year. However, earnings were on par with the Zacks Consensus Estimate.Operational UpdateNet sales increased 1.7% on a year-over-year (excluding the unfavorable impact from foreign exchange of $7 million) basis to $334.9 million. Revenues beat the Zacks Consensus Estimate of $342 million. Cost of sales inched up 0.2% year over year to $225.2 million. Gross profit decreased 1.3% to $109.7 million in the quarter.Selling, general and administrative (SG&A) expenses slumped 13% year over year to $55.7 million. Adjusted operating income improved 1.1% year over year to $77 million.
Segment PerformanceEffective Apr 1, 2016, Armstrong World’s Building Products segment was disaggregated into the following three geographical segments: Americas (including Canada), Europe, Middle East and Africa (including Russia) (EMEA) and Pacific Rim.Americas: Net sales at the Americas segment grew 2% year over year to $226 million driven by improvement in AUV. Adjusted operating income decreased to $72 million in the quarter from $76 million in the prior year quarter, led by higher SG&A expenses and manufacturing costs, as a result ofincreased corporate cost allocation as a result of the AFI separation.
EMEA: The EMEA segment’s sales dropped 5.1% year over year to $74.2 million from $78.2 in the year-ago quarter. Excluding the unfavorable impact of foreign exchange of approximately $1 million, sales increased 1.9% due to higher volumes as higher sales in the Russia were mostly offset by lower sales in the Middle East and continental Europe. Adjusted operating income increased to $5 million from $4 million in the prior year quarter, aided by lower manufacturing and input costs and lower SG&A costs along with higher earnings from WAVE.
Pacific Rim: Net sales in the reported quarter slumped 4.1% year over year to $34.7 million. Excluding the unfavorable impact of foreign exchange of approximately $1 million, sales decreased 1.7%, as improvements in AUV were offset by lower volumes. Operating income was at $1 million compared with break-even results last quarter due to improvements in AUV and lower manufacturing and input costs, which were partially neutralized by lower volumes.FinancialsArmstrong World reported cash and cash equivalents of $142.5 million as of Sep 30, 2016, compared with $250 million as of Sep 30, 2015. The company used $2.64 million of cash in operating activities for the nine-month period ending Sep 30, 2016 compared with cash flow of $144 million in the comparable year-ago period.OutlookArmstrong World narrowed its expected ranges for full year 2016 constant currency sales and adjusted EBITDA to $1.24 to $1.27 billion and $315 to $325 million, respectively. Mid-points of both ranges however remain unchanged. Armstrong World now projects adjusted earnings per share to be in the range of $2.20 to $2.30 per diluted share.
ARMSTRONG WORLD Price, Consensus and EPS Surprise
ARMSTRONG WORLD Price, Consensus and EPS Surprise | ARMSTRONG WORLD Quote
Zacks RankArmstrong World currently carries a Zacks Rank #2 (Buy).
Some better-ranked companies in the construction space include Argan, Inc. AGX, CRH plc CRH and Gibraltar Industries, Inc. ROCK all sporting a Zacks Rank #1 ( Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Argan has an expected earnings growth rate of 51% for the current year.CRH plc has an expected earnings growth rate of 67.3% for the current year.
Gibraltar has an expected earnings growth rate of 45% for the current year.
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