Apogee Q2 FY2026 slides: Sales up 4.6%, but margins compress amid tariff pressures

Introduction & Market Context

Apogee Enterprises Inc (NASDAQ:APOG) released its fiscal 2026 second quarter earnings presentation on October 10, 2025, revealing a mixed financial performance. The architectural products and services provider reported sales growth but faced significant margin compression due to tariffs and competitive pricing pressures.

The company’s stock has experienced volatility, with shares trading at $41.44 after falling 4.34% in the previous session. However, premarket trading showed a modest 1.47% increase to $42.05, suggesting investors had mixed reactions to the quarterly results and revised guidance.

This earnings presentation comes after a strong first quarter that had previously led Apogee to raise its full-year outlook. The latest results indicate a more challenging operating environment has emerged since then.

Quarterly Performance Highlights

Apogee reported second-quarter net sales of $358.2 million, representing a 4.6% increase compared to the same period last year. However, profitability metrics declined significantly across the board.

Adjusted EBITDA fell 16.4% year-over-year to $44.4 million, while adjusted EBITDA margin contracted 310 basis points to 12.4%. Adjusted diluted earnings per share dropped 31.9% to $0.98 compared to $1.44 in the prior year period.

The company’s consolidated results show that while top-line growth was achieved, profitability was significantly impacted by multiple factors including pricing pressures, unfavorable mix, and higher costs.

Segment Performance Analysis

Apogee’s four business segments delivered varied results, with Performance Surfaces emerging as the standout performer. This segment, which benefited from both organic growth and the UW Solutions acquisition, posted the highest adjusted EBITDA margin at 23.2%.

The Architectural Services segment achieved its sixth consecutive quarter of net sales growth and increased its backlog by over $100 million, though it maintained the lowest margin profile at 5.0%. Meanwhile, Architectural Glass delivered solid margins of 16.1% despite volume challenges, and Architectural Metals maintained a respectable 14.8% margin.

Tariff Impact and Challenges

A significant focus of the presentation was the impact of tariffs on Apogee’s business. The company provided a detailed breakdown of both direct and indirect tariff effects, estimating a $0.35-$0.45 unfavorable impact on full-year EPS.

The Metals segment bears approximately 60% of the tariff burden, with Services accounting for about 30%, and the remainder affecting Glass and Surfaces segments. The company has implemented mitigation strategies, including optimizing its manufacturing footprint through Project Fortify Phase 2, which was completed in Q2.

Financial Position and Cash Flow

Apogee maintained a solid financial position despite the challenging environment. The company generated $37.3 million in operating cash flow for the first six months of fiscal 2026, though this represented a decline from $64.1 million in the same period last year. Free cash flow similarly decreased to $25.5 million from $48.5 million.

Total debt decreased to $270 million as of August 30, 2025, down from $285 million at the beginning of the fiscal year. Net debt stood at $230.5 million, representing a reduction from $243.6 million in March 2025. The company returned $11 million to shareholders through dividends during the first half of the fiscal year.

Revised Outlook and Forward Guidance

In response to the challenging operating environment, Apogee revised its full-year fiscal 2026 guidance downward. The company now expects net sales between $1.39 billion and $1.42 billion, compared to its previous projection of $1.40 billion to $1.44 billion.

Similarly, adjusted diluted EPS guidance was lowered to $3.60-$3.90 from the previous range of $3.80-$4.20. This revision reflects the impact of a highly competitive pricing market, aluminum cost inflation, elevated health insurance costs, and the estimated $0.35-$0.45 EPS impact from tariffs.

Strategic Initiatives and Outlook

Despite the near-term challenges, Apogee’s management expressed confidence in the company’s strategic direction. They highlighted sequential improvements in net sales and adjusted diluted EPS, and projected second-half year-over-year growth driven by the Performance Surfaces segment.

The company remains focused on executing its strategies to improve outcomes, including continued implementation of Project Fortify Phase 2, driving productivity improvements through the Apogee Management System, and maintaining an active M&A pipeline to identify additional strategic assets.

Looking ahead, Apogee expects capital expenditures between $35 million and $40 million for fiscal 2026, with an adjusted effective tax rate of approximately 27%. While the revised guidance reflects current challenges, management’s commentary suggests confidence in the company’s ability to navigate the difficult operating environment through strategic initiatives and operational improvements.

Full presentation:

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