Not since the Wicked Witch of the East met her comeuppance has anyone been so damaged by a fall in housing as we have this year. Ryland
The nation's leading light in commercial glassmaking reported fiscal Q3 2009 earnings on Wednesday, and here's what CEO Russell Huffer had to say:
- Last quarter's walkback on guidance stands. Fiscal 2009 earnings look to range between $1.65 and $1.82 per share, with year-over-year declines in both revenues and earnings per share on tap for Q4, as "Apogee experiences the first full quarterly impact of the commercial construction slowdown" that Apogee warned of three months ago.
- "Delays, cancellations and slower conversion of bid projects into awards have affected the size of our backlog" -- which is a polite way of saying that $73.5 million worth of backlog has been vaporized over just the past three months, as customers rethink their need for new buildings -- and the windows that go in 'em.
- Although sales grew 14% year over year in Q3, backlog dropped 18%. Which bodes ill indeed for sales and earnings growth in the near future. Basically, business looks to be coming to a screeching halt.
Fortunately, this information provides investors two lessons useful in plotting their portfolio moves. First and foremost, if you own a company tied to the commercial construction biz -- Fluor
And Lesson No. 2?
If you absolutely, positively have to own a commercial construction business, make sure it's one like Apogee. A crisis is a-comin', true, but Apogee's done about all that's humanly possible to prepare for the lean times. Costs have been cut. Debt paid down. Cash flow maximized.
As Apogee heads into its own private Idaho of recession, it's on track to boast annualized free cash flow of nearly $29 million. Long-term debt has been paid down by half, to $28.4 million, low enough that if management works hard at it, it could conceivably clear off its balance sheet within one year. And the stock now carries a market cap of just nine times this year's putative free cash flows (folks, that's cheap). Analysts see Apogee surviving the recession and emerging into 13% long-term earnings growth on the other side, and I agree.
You don't need a drop of Windex to see that Apogee's a long-term winner.
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