Architectural Services Company Apogee Shares Slide On Dimmed FY25 Forecast - What's Going On?

Apogee Enterprises, Inc. APOG shares are trading lower after the company reported third-quarter results.

Sales of $341.3 million beat the consensus estimate of $332.6 million. Revenue rose 0.5% year-over-year, driven by an $8.8 million contribution from the acquisition of UW Solutions and a more favorable project mix in Architectural Services.

The growth is partially offset by a less favorable mix in Architectural Framing Systems and a lower volume in Architectural Glass.

Adjusted EPS was $1.19, beating the consensus of $1.12.

Gross margin fell 50 basis points to 26.1%, mainly due to lower sales volume, an unfavorable product mix in Architectural Framing Systems, higher incentive compensation, and lease expenses.

Adjusted operating income was $35.4 million, and the adjusted operating margin decreased 70 basis points to 10.4%. The decline in margin was mainly due to lower sales volume, a less favorable product mix, higher incentive compensation and lease expenses.

Apogee held $43.9 million in cash and cash equivalents as of November 30.

Fiscal year-to-date, the company has returned $31.3 million to shareholders through share repurchases and dividend payments.

Outlook: Apogee Enterprises now expects FY25 net sales to decline around 5%, vs. the prior forecasted decline of 4% to 7%.

The company expects adjusted EPS to be at the bottom end of the prior guidance range of $4.90 – $5.20, vs. consensus of $5.07.

Apogee’s outlook includes an anticipated reduction of approximately $0.20 in adjusted diluted EPS due to the reversion to a 52-week year compared to fiscal 2024.

Project Fortify’s adverse net sales are expected to have no material effect on adjusted diluted EPS.

The company now expects pre-tax charges of $16 million to $17 million related to Project Fortify, which will result in annualized cost savings of $13 million to $14 million.

About 60% of these savings are expected to be realized in fiscal 2025, with the remainder in fiscal 2026. The plan is expected to be largely complete by the fourth quarter of fiscal 2025.

Apogee now anticipates capital expenditures of $40 million – $45 million in FY25.

Price Action: APOG shares are down 5.44% at $67.26 premarket at the last check Tuesday.

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