Why Apogee is up 25% today

Architectural Products and Services Company Shares Apogee Enterprises (APOG 22.65%) was up 25.5% on Friday as of 2:00 PM ET.

Apogee released its second quarter earnings today. The company not only beat expectations, but raised its profit guidance for the rest of the year, even amid negative revenue growth. The news sent stocks soaring to all-time highs.

Management increases profitability

Apogee manufactures high quality acrylic framing, glass and protective products for construction and also offers architectural services. But its main markets are in the non-residential space. So it hasn’t exactly had a high growth profile recently as non-residential construction has had a tough couple of years amid work-from-home trends and higher interest rates.

However, the tough environment has made the stock quite cheap. Meanwhile, management has trimmed lower-margin businesses and boosted profitability through an initiative called Project Fortify. That came out in today’s earnings report. While revenue fell 3.2%, the company’s non-GAAP (adjusted) earnings per share (EPS) managed to rise 5.9% to $1.44. And both figures easily beat analysts’ low expectations.

Moreover, Apogee actually raised its full-year adjusted EPS outlook to a range of $4.90 to $5.20. This is an increase from a previous range of $4.65 to $5 given in the previous earnings release. That’s even as the company maintained a 4% to 7% revenue outlook. decline.

Looking ahead

Apogee is now up 65% year-to-date after today’s rally, but still trades at just 16.7 times the midpoint of this year’s recently revised EPS guidance. Although this is a higher P/E ratio than it has had in the past year, it is not that expensive. And if the company’s turnaround continues to succeed and Apogee eventually returns to top-line growth, Apogee could still be a solid buy.