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Apogee Enterprises, Inc. (APOG) Could Shatter Earnings And Raise The Flag

 December 14, 2012 03:30 PM

(By Rich Bieglmeier) Apogee Enterprises, Inc. (APOG) is expected to report earnings before the market opens on Wednesday, December 19, 2012. Wall Street anticipates that APOG will earn $0.23 for its 3rd quarter. iStock expects the industrial goods maker will report earnings that will exceed Wall Street's consensus number. The iEstimate is $0.30 – a 7 cents upside surprise.

Apogee Enterprises is distinctive value-added glass solutions for enclosing commercial buildings and framing art. The company engineers, fabricates and installs the walls of glass and windows that enclose buildings. For picture framing, their glass reduces reflectivity and fading from sunlight.

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In the past four years, being on the right side of the earnings trade for APOG has been easy. Eighty-five percent of the time, the stock price follows the side of the surprise. When the building materials company announced earnings that topped Wall Street's estimate, the stock made shareholders happy 11 out of 12 bullish surprises with an average gain of 6.28%.  Three of the four bearish surprises trimmed the stock by 5.40%.

In its second quarter, margins increased as APOG's 2012 cost of sales fall to 82.3% of revenues from 2011's  85.7%; meanwhile, selling, general and administrative expenses dropped to 17.1% from 17.9% year-over-year. Wall Street will be looking to see if the trend continues.

Interested investors will also keep an eye on Apogees' backlog. Three months ago,           

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backlog grew to $243.9 million, compared to $238.4 million at February 26, 2011. Despite "soft market conditions," backlog and sales increased 13.7%. With construction making a comeback, wind may have shifted to tail form head.

iStock also likes the fact that inventory grew at a much slower pace than sales at 4.4% and accounts receivables actually dropped. Typically, these are signs of good earnings to come.

According to our take on APOG's stock chart, the stock is poised to roll if eps go the right way. We see a flag or pennant pattern where shares shot up and fluctuated, slightly lower as the range between tops and bottoms shrink. Earnings will be the point that determines the stock's next move. A positive surprise should put the stock beyond $25. A swing and a miss, and the stock falls to $21ish.



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