Architectural glass has an obvious tie to the health of the construction industry, and Apogee Enterprises (NASDAQ:APOG) relies on a strong economy to help drive sales of its glass products. Yet recently, Apogee has shown some signs of slowing growth, and that has made some people question whether the company will be able to sustain its impressive past pace of growth.

Coming into Thursday's fiscal first-quarter financial report, Apogee investors expected solid revenue gains but were prepared for some pressure on its bottom line. Results were somewhat mixed, with better performance on key measures than most had expected but with continued uncertainty about its longer-term pace of growth. Let's look more closely at Apogee Enterprises' report to search for clues about what its future looks like.

Architectural glass.

Image source: Apogee Enterprises.

Apogee tries to shine

Apogee's fiscal first-quarter results reflected the mix of optimism and concern among those following the stock. Revenue climbed 10% to $272.3 million, which was a little better than what most investors had expected to see on the top line. GAAP net income fell 9% to $16.1 million, but after accounting for various extraordinary items, adjusted earnings of $0.62 per share were $0.03 better than the consensus forecast among shareholders.

Looking more closely at the numbers, Apogee's opportunities and challenges showed up quite clearly in its segment results. The architectural services unit was the big loser on the quarter, seeing revenue plunge 20% as the timing of project activity worked against the company during the period. Lower volume also hit operating income, sending it down by three-quarters. However, on the positive side, segment backlog was up, due in part again to project timing. The large-scale optical technology unit also suffered declines in revenue and operating income, even though its small size gives it less weight than the other divisions.

However, Apogee's other businesses saw somewhat better performance. The architectural glass segment enjoyed a rise of 5% in revenue, with the company bringing in more mid-sized projects from the U.S. market. Startup costs from production of oversize glass weighed on margin figures, though, sending operating income down slightly from year-earlier figures. The big winner was the architectural framing systems segment, which saw sales soar by more than a third. Most of that growth came from the acquisition of curtain-wall system specialist Sotawall, but organic growth of 8% was also impressive. A sizable rise in operating income was also notable.

CEO Joseph Puishys put the quarter in perspective. "In the first quarter," Puishys said, "we continued to reposition Apogee to deliver more stable future revenue streams and growth through M&A activity and start-up of new capabilities." The CEO also noted that most of the downward pressure on certain business segments was already anticipated and was temporary in nature.

What's ahead for Apogee?

Apogee is enthusiastic about its future prospects. In Puishys' words, "We've made significant progress in our journey to deliver consistently solid performance regardless of economic conditions." He specifically noted the acquisitions of Sotawall and aluminum window maker EFCO as driving the push toward greater consistency in results, and Apogee has also bulked up its presence in the mid-size building and retrofit areas.

Still, updates to Apogee's guidance didn't inspire confidence among investors. Incorporating the new acquisitions, Apogee now believes that revenue will grow 26% to 28% for the full fiscal year, but EFCO's revenue will come in with lower operating margin, resulting in potential shrinking of the overall company's margin figures. GAAP earnings expectations for $3.31 to $3.51 per share were down slightly from last quarter's guidance, although Apogee projects that adjusted earnings should be between $3.65 and $3.85 per share.

Apogee stock fell 4% on Thursday following the company's morning release of its fiscal first-quarter results. The question left outstanding for Apogee is whether it can reinvigorate its growth enough to satisfy growth investors. The company is making a good-faith effort with its recent acquisition activity, but the jury's still out on whether it will be enough to make a difference in the long run.