The global producer of flooring and ceiling products failed to adapt quickly enough to an increasingly competitive market, analysts said.
"Overall, we were disappointed that the company did not react more quickly to the heightened competitive environment in the quarter, which might have mitigated its volume share losses" analysts said, adding, "the company [also] recently lowered its full-year 2014 sales and EBITDA guidance with its pre-announcement."
Separately, TheStreet Ratings team rates ARMSTRONG WORLD INDUSTRIES as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ARMSTRONG WORLD INDUSTRIES (AWI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AWI's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Despite the current debt-to-equity ratio of 1.51, it is still below the industry average, suggesting that this level of debt is acceptable within the Building Products industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.86 is weak.
- ARMSTRONG WORLD INDUSTRIES's earnings per share declined by 25.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ARMSTRONG WORLD INDUSTRIES reported lower earnings of $1.70 versus $2.41 in the prior year. This year, the market expects an improvement in earnings ($2.09 versus $1.70).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Building Products industry and the overall market on the basis of return on equity, ARMSTRONG WORLD INDUSTRIES has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full analysis from the report here: AWI Ratings Report