Apogee Enterprises, Inc. APOG reported adjusted earnings per share (EPS) of $1.19 for third-quarter fiscal 2025 (ended Nov. 30, 2024), surpassing the Zacks Consensus Estimate of $1.14. The bottom line marked a 3% drop from the prior-year quarter.

APOG attributed the decline to unfavorable sales leverage impacts of lower volume, a less favorable product mix, and higher incentive compensation and lease expenses, partially offset by a more favorable mix of projects in Architectural Services and lower insurance-related costs. 

Including one-time items, APOG’s EPS in the quarter under review was 96 cents compared with $1.23 in the prior-year quarter.

Apogee Enterprises Stock Price, Consensus and EPS Surprise

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Apogee’s net sales inched up 0.5% year over year to $341 million in the quarter under review.  A $8.8-million contribution from the acquisition of UW Solutions and a more favorable mix of projects in Architectural Services were partially offset by a less favorable mix in Architectural Framing Systems and a lower volume in Architectural Glass.

Apogee’s Q3 Margins Contract Year-on-Year

Cost of sales in the fiscal third quarter moved up 1% from the prior-year quarter to $252 million. The gross profit declined 1.3% from the prior-year quarter to $89 million. The gross margin contracted 50 basis points to 26.1% in the quarter under review.

The downfall was attributed to unfavorable sales leverage impacts of lower volume, a less favorable product mix (primarily in Architectural Framing Systems), and higher incentive compensation and lease expenses. However, the impacts of a more favorable mix of projects in Architectural Services, lower quality-related expenses, and reduced insurance-related costs somewhat offset the impacts.

Selling, general and administrative expenses moved up 15% from the prior-year quarter to $60.5 million, reflecting acquisition-related expenses associated with the UW Solutions transaction, restructuring expenses related to Project Fortify and the unfavorable sales leverage impacts of lower volume.

The operating income plunged 24% from the year-earlier quarter to $28.6 million. The decline was due to unfavorable sales leverage impacts of lower volume, a less favorable product mix, and higher incentive compensation and lease expenses, partially offset by a more favorable mix of projects in Architectural Services and lower insurance-related costs. The operating margin in the reported quarter was 8.4% compared with the prior-year quarter's 11.1%.

Adjusted operating income stood at $35.4 million, 6% lower than the year-ago quarter. The adjusted operating margin was 10.4% in the third quarter of fiscal 2025 compared with 11.1% in the prior-year quarter.

APOG’s Segment Performance in Q3

In the fiscal third quarter, net sales in the Architectural Framing Systems segment moved down 1% from the prior-year quarter to $138 million. The downside was due to a less favorable mix, partially offset by improved volumes. The segment's adjusted operating profit was $13.6 million compared with the year-ago quarter's $17 million.

Sales in the Architectural Glass segment slumped 23% from the prior-year quarter to $70 million, reflecting lower volumes due to weak end-market demand. The segment’s adjusted operating income was $10 million, down from $15 million in the third quarter of fiscal 2024.

Sales in the Architectural Services segment grew 10.8% from the prior-year quarter to $105 million due to higher volumes and a favorable mix of projects. The segment's adjusted operating profit surged 70% from the prior-year quarter to $9 million.

The Architectural Services segment's backlog came in at $742 million at the end of the fiscal third quarter compared with $792 million at the end of the prior quarter.

Sales in the Large-Scale Optical Technologies segment rose 27.6% from the prior-year quarter to $33.2 million. The top-line figure included a $8.8-million inorganic sales contribution from the acquisition of UW Solutions. The segment posted an operating profit of $6.2 million in the fiscal third quarter, down 13% from the prior-year quarter's $7.1 million.

APOG’s Cash Position & Balance Sheet

Apogee had cash and cash equivalents of around $44 million at the end of third-quarter fiscal 2025 compared with $37 million at the end of fiscal 2024. Cash flow from operating activities was $95 million in the nine months ended Nov. 30, 2024, compared with the prior-year period’s $129.3 million.

The long-term debt was $272 million at the end of third-quarter fiscal 2025, way higher than $62 million at the end of fiscal 2024 as the company increased borrowings on its existing credit facility to fund the acquisition of UW Solutions.

Apogee returned $31.3 million in cash to its shareholders in the first nine months of fiscal 2025 through dividend payments and share repurchases.

APOG Acquires UW Solutions to Boost Portfolio

In the third quarter of fiscal 2025, the company completed the acquisition of UW Solutions for $242 million in cash. It complements Apogee’s portfolio, expanding offerings for non-residential construction and accelerating diversification in the Large-Scale Optical segment. The acquisition is expected to contribute more than $100 million to net sales, with an adjusted EBITDA margin of approximately 20% in fiscal 2026.

Apogee’s Guidance for FY25

APOG anticipates net sales to decline 5% year over year in fiscal 2025. While the company expects a $30-million contribution from the acquisition of UW Solutions, it will be offset by the impacts of lower volumes in the fiscal fourth quarter. APOG expects a 2-percentage-point decline related to fiscal 2025 reverting to a 52-week year and a 1-percentage-point decline related to Project Fortify to eliminate certain lower-margin product and service offerings.

Adjusted EPS is expected to be near the bottom end of its guidance of $4.90-$5.20. This expectation includes the impacts of approximately 5 cents of dilution related to the acquisition of UW Solutions and lower-than-expected volume in the fiscal fourth quarter. The reversion to a 52-week year will likely reduce adjusted EPS by 20 cents from that reported in fiscal 2024. The company, however, expects no material impact on adjusted EPS related to the adverse net sales impacts of Project Fortify.

APOG Stock Price Performance & Zacks Rank

Shares of Apogee have gained 36.7% over the past 12 months against the glass products industry's decline of 9.6%.

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The company currently carries a Zacks Rank #3 (Hold).

A Glass Product Stock Awaiting Results

O-I Glass, Inc. OI is expected to release its fourth-quarter 2024 results soon. The Zacks Consensus Estimate for the company’s earnings per share is pegged at a loss of 10 cents for the fourth quarter, suggesting a decline from the earnings of 12 cents reported in the fourth quarter of 2023. The Zacks Consensus Estimate for total revenues is pinned at $1.61 billion, indicating a year-over-year decline of 1.75%.

Over the trailing four quarters, OI’s earnings has surpassed the Zacks Consensus Estimate in three quarters while missing once. OI has a trailing four-quarter earnings surprise of 24.11%, on average.

Other Industrial Product Stocks Awaiting Results

Applied Industrial Technologies AIT is expected to release its fourth-quarter 2024 results later this month. The company’s earnings have surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering an average earnings surprise of 4.9%.

The Zacks Consensus Estimate for AIT’s earnings per share is pegged at $2.21 for the fourth quarter, suggesting a 1.3% dip from the year-ago reported figure. The Zacks Consensus Estimate for the company’s total revenues is pinned at $1.08 billion, indicating a year-over-year increase of 0.12%.

Applied Industrial currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Packaging Corporation of America PKG is scheduled to release fourth-quarter 2024 results on Jan. 28, 2025. PKG’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering an average earnings surprise of 8.6%.

The Zacks Consensus Estimate for PKG’s fourth-quarter 2024 earnings is pegged at $2.51 per share, indicating year-over-year growth of 18%. The Zacks Consensus Estimate for PKG’s total revenues is pinned at $2.13 billion, implying a year-over-year rise of 10%.

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