The architectural products and services company raised full-year EPS guidance even as revenue declined.
Company shares of architectural products and services Apogee Enterprises (APOG 23.37%) it rallied 25.5% on Friday, as of 2 pm ET.
Apogee released second quarter results today. Not only did the company beat expectations, but it also raised profit guidance for the rest of the year, even amid negative revenue growth. The news sent stocks rallying to all-time highs.
Management increases profitability
Apogee manufactures high-end framing, glass and protective acrylic building products, and also provides architectural services. But its main markets are in the non-residential space. So it hasn’t exactly had a great growth profile recently, as non-residential construction has had a rough few years between work from home trends and higher interest rates.
However, the tough environment has made the stock quite cheap. Meanwhile, management has cut lower-margin businesses and boosted profitability through an initiative called Project Fortify. That came out in today’s earnings report. While revenue fell 3.2%, the company’s non-GAAP earnings per share (EPS) managed to grow 5.9% to $1.44. And both figures easily beat analysts’ low expectations.
Additionally, Apogee raised its full-year outlook for adjusted EPS to a range of $4.90 to $5.20. That’s from a previous range of $4.65 to $5 given on the previous earnings release. This is even when the company has maintained an outlook for an income of 4% to 7%. decadence.
Looking ahead
Apogee is now up 65% on the year after today’s rally, but is still only trading at 16.7 times the midpoint of this year’s just-revised EPS guidance. While it is a higher P/E ratio than the one it had last year, it is not as expensive. And if the company’s transformation continues to succeed and Apogee eventually returns to top-line growth, Apogee could still be a solid buy.
Billy Duberstein and/or his clients have no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.