Apogee Enterprises (APOG, Financial) saw a significant rise of 22% following its Q2 earnings report. The company delivered another impressive EPS beat, marking the sixth consecutive double-digit EPS surprise. Although revenue fell by 3.2% year-over-year to $342.4 million, it surpassed analysts' expectations for a more significant decline. Apogee also significantly increased its FY25 EPS guidance to $4.90-5.20, up from $4.65-5.00, while reaffirming its FY25 revenue guidance at a decline of 4% to 7%.
- The revenue decline was partly due to a strategic shift away from lower-margin product lines and ongoing softness in non-residential construction markets. Despite lower volumes, Apogee improved its adjusted operating margin to 12.6% from 11.5% a year ago, marking the second consecutive quarter with margins above 12%.
- In the Architectural Framing Systems segment, sales dropped 11% year-over-year to $141.4 million, mainly due to exiting certain lower-margin product lines and reduced demand. However, sales improved 6% sequentially. The Architectural Glass segment saw a 4.2% revenue decline to $90.1 million, with strong pricing and mix offsetting volume pressures.
- The Large-Scale Optical unit experienced a sales decline due to lower retail channel volume, partially offset by a favorable mix. The company made progress on its LSO capacity expansion project, expected to be operational in the second half of the fiscal year. The Architectural Services segment was the best performer, with a 16.1% sales increase to $98 million, driven by a favorable project mix and increased volume.
- Apogee is optimistic about its upcoming acquisition of UW Solutions, announced last month for $240 million. This acquisition, expected to close in Q3, will integrate into the LSO segment, adding over $100 million in revenue with accretive adjusted EBITDA margins.
Overall, Apogee delivered a strong quarter with robust guidance, outperforming expectations amid non-residential construction sector challenges. The anticipation of lower interest rates could further benefit the company by encouraging capital-intensive construction projects. The positive Q2 results and guidance have clearly pleased investors, as reflected in the stock's performance.
