Apogee delivers best-ever quarterly operating margin

Apogee Enterprises, Inc. (Nasdaq:APOG) has announced fiscal 2016 third-quarter results.

“In the third quarter, Apogee achieved its best quarterly operating margin ever – 11.7 percent, as we delivered another quarter of strong earnings and margin growth,” said Joseph F. Puishys, Apogee chief executive officer. “Operating income grew 35 percent and EPS grew 34 percent, with our operating and gross margins expanding 300-plus basis points. Revenues were impacted by foreign currency effect and lower volumes in our international operations, as well as by project timing that pushes some revenues into fiscal 2017, when we expect to see double-digit top-line growth.
“Backlog grew to our highest level ever, up more than $30 million from the second quarter, to $545 million as we continue to experience strong bidding and award activity at improving margins,” he said. “Our businesses operated well, and all four segments expanded operating margins – by triple-digit basis points in the architectural segments – as well as backlog. We continue to make strong gains in manufacturing operational excellence, leveraging our Lean initiative.
“Our fiscal 2016 year-to-date operating margin is 9.5 percent, up 310 basis points from the prior year, and year-to-date revenues are up 5 percent and within this we’ve had double-digit growth in our U.S. architectural businesses,” said Puishys. “We look for a strong finish to fiscal 2016 – we anticipate a double-digit operating margin with revenue growth in the fourth quarter, positioning us to achieve the goal we set three years ago of $1 billion in revenues at 10 percent operating margin.”
“We continue to expect a strong finish to fiscal 2016, and have increased our earnings per share guidance to $2.15 to $2.25, from $2.10 to $2.25,” said Puishys. “In the fourth quarter, we expect to grow revenues both year over year and sequentially. Our revenue growth expectation for the full year has been adjusted to mid single digit, from high single digit. With the work that has moved into fiscal 2017 along with the expectation of continued favorable market conditions, we are anticipating double-digit revenue growth next year.
“Our achievement of record backlog in the quarter underscores our robust bidding activity,” he said. “This high level of backlog, combined with commitments, bidding and award activity, support our longer-term outlook for revenues of $1.3 billion at an operating margin of at least 12 percent in fiscal 2018.
He said that capital expenditures for the year are anticipated to be $40 to $45 million as Apogee invests to increase capabilities, capacity and productivity. The gross margin is expected to be at least 24.5 percent.
“I am pleased that our strategies to grow through new geographies, new products and new markets, along with our focus on better project selection, productivity and operational improvements, are delivering positive results,” Puishys said.