On Wednesday, DA Davidson analyst Brent Thielman adjusted the price target on Apogee (NASDAQ:APOG) Enterprises (NASDAQ:APOG) shares, reducing it to $62 from the previous $75, while maintaining a Neutral rating on the stock. Thielman's assessment aligns the new target with long-term average multiples, reflecting a shift in expectations due to market conditions and demand. The stock has experienced a significant 19% decline over the past week, though InvestingPro analysis suggests the company is currently undervalued, trading at a P/E ratio of 12.9x.
Apogee Enterprises reported third-quarter earnings that were close to expectations, with a GAAP EPS of $0.96 per share and an adjusted EPS of $1.19 per share, compared to the consensus and Davidson's estimates of $1.09 and $1.14, respectively. Revenue came in at $341.3 million, nearly flat year-over-year, and gross profit (GP) and EBIT declined by 1% and 24%, respectively.
Excluding restructuring and acquisition costs, EBIT decreased by 6% year-over-year. Despite these challenges, InvestingPro data shows the company maintains strong financial health with a "GREAT" overall score and has consistently maintained dividend payments for 51 consecutive years.
The company's glass segment saw a 23% year-over-year decline in sales due to lower volume, although EBIT margin for this segment returned to Apogee's target range of 10%-15%. The framing segment experienced a slight 1% drop in sales, primarily due to an unfavorable mix, partially offset by volume, with framing margins falling to 9.2%. Services revenue, however, increased by 11% year-over-year, driven by increased volume and favorable product mix, resulting in an improved EBIT margin of 9.3%.
Large-Scale Optical (LSO) sales saw a notable increase of 28% year-over-year, with organic sales down by 9%. This increase was attributed to the acquisition of UW Solutions completed in November, which contributed to the sales for approximately one month. However, the acquisition had a dilutive impact on margins, with EBIT margin excluding acquisition costs at 18.6%, a significant drop from the previous year's margin of 27.3%.
Thielman highlighted Apogee's ability to handle market challenges, but also noted the potential for a more competitive environment to limit near-term margin growth. The analyst will continue to monitor leading indicators, interest rates, and company initiatives for potential catalysts that could affect the stock's performance.
According to InvestingPro, the company maintains a healthy liquidity position with a current ratio of 1.63 and operates with moderate debt levels. Subscribers can access 12 additional ProTips and comprehensive financial metrics in the Pro Research Report, providing deeper insights into Apogee's financial position and growth prospects.
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