Apogee Exceeded

apogee, n.: The farthest or highest point; the apex.

Every so often, a company lives up to its name. Like, say, when Stock Advisor pick Netflix (Nasdaq: NFLX  ) announced it would begin actually sending flicks out over the Net. More pertinent to today's column, though, is the moment when shares of window maker Apogee Enterprises (Nasdaq: APOG  ) climbed 11% higher than their price before last Wednesday's earnings announcement. The company's shares have risen in price to nearly match their peak in the days of the late-'90s bubble.

What drove Apogee to this apparent peak?

  • 17% full-year sales growth.
  • 29% growth in earnings from continuing operations.
  • 100%-plus improvement in operating profits for the flagship architectural glass division.
  • 150 basis points' worth of operating margin improvement.
  • Full-year 2008 guidance upped 5.6%.
  • A long-overdue decision to exit the money-losing business of manufacturing aftermarket car windshields.
  • And finally, an almost-as-brilliant decision to exit the business of selling pre-framed art and wall decorations within the next several months.

Much like another ill-favored, construction-industry-hobbled favorite company of mine -- American Woodmark (Nasdaq: AMWD  ) -- Apogee's management has stared long and hard at the obvious, and finally made the right call. As you'll recall, Apogee has heretofore been comprised of three main divisions:

  • a big-revenue, moderate-margin business selling commercial building windows.
  • a small-revenue, high-margin business selling picture frames.
  • a small-revenue, negative-margin business selling car windshields.

In 2007, management decided to get out of its least attractive business and use the resulting spare manufacturing capacity to service its better businesses. As a result, it's now looking to expand profit margins in both of its two remaining businesses in 2008. It will also continue posting double-digit sales growth in architectural glass, and replace all of the revenues from its discontinued pre-framed art segment with double-digit-margin revenues from higher value-added framing products.

Little wonder that Wall Street is on its feet, applauding the results -- if you haven't noticed, I am, too.

Get the Fool skinny on Apogee in:

Netflix is a Stock Advisor selection. You can find out why, and see which other companies have made the cut, with a 30-day free trial of our flagship newsletter.

Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 525744, ~/Articles/ArticleHandler.aspx, 7/23/2014 12:25:02 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement