Foolish Forecast: Apogee Comes Around Again (APOG)

Foolish Forecast: Apogee Comes Around Again

For more than three years, commercial glassmaker Apogee (Nasdaq: APOG ) has consistently met or exceeded Wall Street's earnings expectations (last quarter, it did so with a real bang). It aims to extend its long winning streak Wednesday afternoon on the back of a strong report for fiscal second-quarter 2008.

What analysts say:

Buy, sell, or waffle? Only three analysts track Apogee. Two rate it a buy, and one a hold.
Revenue. On average, the analysts expect to see 10% sales growth to $207.3 million.
Earnings. Profits are predicted to rise 64% to $0.36 per share.

What management says:
Calling himself "very pleased" with Apogee's Q1 results, CEO Russell Huffer said back in June that better-than-expected results in large-scale optical glass (that's "picture framing" to you and me), when combined with a doubling of operating profits in architectural glass (think "building windows"), gave him confidence in raising guidance for the year to a range of $1.37 to $1.47 per share by year-end.

What management does:
Huffer thinks the company can keep operating margins in the upper sixes -- which, incidentally, is the company's average operating margin over the last 12 months. Combine that with growing revenue, and the business should perform well this year. Not everybody needs rival PPG's (NYSE: PPG ) 11% margin to be a success, after all.

Margin	2/06	6/06	9/06	12/06	3/07	6/07
Gross	19.3%	19.1%	19.1%	19.2%	19.1%	19.8%
Operating	4.8%	4.9%	5.1%	5.7%	6.1%	6.8%
Net	3.6%	3.6%	3.8%	3.7%	4.1%	4.8%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
As I mentioned last quarter, it's unlikely that strong margins and strengthening revenue will translate into free cash flow for Apogee this year. To capitalize on rising demand, Apogee continues to build out its capacity, and the capital requirements of this exercise -- roughly $60 million in fiscal 2008 -- are almost certain to eat up all the cash the company's operations can generate, and then some.

I wish it weren't so, because I love how this relatively unknown firm just continues to outperform expectations on its GAAP numbers, and I would like to see it generate more cash profits for its trouble. However, that just doesn't seem to be in the cards.

What did we expect to see in Apogee's results last quarter, and what did we get? Find out in:

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