Yahoo Finance Armstrong World's (NYSE:AWI) Q2: Beats On Revenue, Provides Encouraging Full-Year Guidance
Ceiling and wall solutions company Armstrong World Industries (NYSE:AWI) reported Q2 CY2024 results exceeding Wall Street analysts' expectations , with revenue up 12.2% year on year to $365.1 million. The company's full-year revenue guidance of $1.43 billion at the midpoint also came in 1% above analysts' estimates. It made a non-GAAP profit of $1.62 per share, improving from its profit of $1.34 per share in the same quarter last year.
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Armstrong World (AWI) Q2 CY2024 Highlights:
Revenue: $365.1 million vs analyst estimates of $360.4 million (1.3% beat)
EPS (non-GAAP): $1.62 vs analyst estimates of $1.55 (4.6% beat)
The company lifted its revenue guidance for the full year from $1.42 billion to $1.43 billion at the midpoint, a 0.9% increase
EBITDA Guidance for the full year is $480 million at the midpoint, in line with analysts' expectations
Gross Margin (GAAP): 40.9%, up from 38.1% in the same quarter last year
Free Cash Flow of $62 million, up 122% from the previous quarter
Market Capitalization: $5.72 billion
“With double digit net sales growth and record earnings, our second-quarter results further demonstrate the resilience of our business model and the strength of our growth initiatives,” said Vic Grizzle, President and CEO of Armstrong World Industries.
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE:AWI) provides ceiling and wall products to commercial and residential spaces.
Building Materials
Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.
Sales Growth
A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Unfortunately, Armstrong World's 5.9% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Armstrong World's annualized revenue growth of 7.1% over the last two years is above its five-year trend, but we were still disappointed by the results.
This quarter, Armstrong World reported robust year-on-year revenue growth of 12.2%, and its $365.1 million of revenue exceeded Wall Street's estimates by 1.3%. Looking ahead, Wall Street expects sales to grow 7.9% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Armstrong World has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 25.5%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Armstrong World's annual operating margin decreased by 6.4 percentage points over the last five years. Even though its margin is still high, shareholders will want to see Armstrong World become more profitable in the future.
In Q2, Armstrong World generated an operating profit margin of 26%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Armstrong World's unimpressive 6.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. Armstrong World's two-year annual EPS growth of 18.3% was fantastic and topped its 7.1% two-year revenue growth.
In Q2, Armstrong World reported EPS at $1.62, up from $1.34 in the same quarter last year. This print beat analysts' estimates by 4.6%. Over the next 12 months, Wall Street expects Armstrong World to grow its earnings. Analysts are projecting its EPS of $5.60 in the last year to climb by 9.8% to $6.14.
Key Takeaways from Armstrong World's Q2 Results
It was good to see Armstrong World beat analysts' revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street's estimates. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $130.75 immediately following the results.
So should you invest in Armstrong World right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
