Hot Stock That Must Be in Your Portfolio: Armstrong Flooring Inc. (NYSE: AFI)

Loretta Morfin

I am Loretta Morfin and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets.

I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking.

Address: 3966 Euclid Avenue, San Luis Obispo, CA 93401, USA
Phone: (+1) 805-361-3810
Email: lorettamorfin@importtourism.com
Loretta Morfin

LANCASTER, Pa., July 22, 2019 – Shares of Armstrong Flooring Inc. (NYSE: AFI) inclined 1.04% to $8.74. The stock grabbed the investor’s attention and traded 161.958K shares as compared to its average daily volume of 262.55K shares. The stock’s institutional ownership stands at 86.90%.

Armstrong Flooring, Inc. (AFI) reported net sales reduced 13.8% to $141.70M from $164.30M in the first quarter of 2018, counting an adverse currency impact of 120 basis points. The decrease in net sales was mainly because of lower volumes and unfavorable mix, partly offset by overall higher selling prices in response to inflationary pressure. Lower volumes in the first quarter of 2019 reflected overall soft end-market demand together with challenging weather condition in many regions of the U.S., particularly in our residential categories. In addition inventory levels reduced in the distributor channel, in part because of the timing of customer purchases in response to uncertainty in U.S. tariff policy since the second half of 2018.

Net loss in the first quarter of 2019 was $16.70M, or diluted loss per share of $0.63, as contrast to a net loss of $10.40M, or diluted loss per share of $0.40, in the prior year quarter. Adjusted net loss was $13.10M, or adjusted diluted loss per share of $0.49, as contrast to an adjusted net loss of $3.50M, or adjusted diluted loss per share of $0.13, in the prior year quarter.

First quarter 2019 adjusted EBITDA was break even, as contrast to $10.60M in the prior year quarter. The prior year quarter benefited from $4.30M of customer reimbursements, which did not recur in the first quarter of 2019. The remainder of the decrease in adjusted EBITDA was driven by input cost inflation pressure and lower net sales, partially offset by improved productivity.

Cash Flow and Balance Sheet:

During the first quarter of 2019, the Company used $63.20M of cash from operations, mainly because of a boost in net working capital following a lower than normal balance at December 31, 2018, in addition to normal seasonal working capital cash outflows during the first quarter. During the first quarter of 2019, the Company paid down $25.0M of its revolving credit facility. At March 31, 2019, the Company had cash, cash equivalents and restricted cash of $75.70M and long-term debt of $74.00M. As of March 31, 2019, the Company had $71.10M of availability under its revolving credit facility.

Share Repurchase Authorization:

The Company also declared recently that its Board of Directors has increased its share repurchase program for an additional $50.0M beyond the $41.0M already repurchased under the prior share repurchase program, effective right away. Repurchases under the new program may be made through open market, block, and privately negotiated transactions, counting Rule 10b5-1 plans, at times and in such amounts as management deems appropriate, subject to market and business conditions, regulatory requirements and other factors. The authorization to repurchase additional shares under the increased repurchase program is aligned with the Company’s aim to return a portion of the net sale proceeds from its wood flooring business, which closed on December 31, 2018.

Full Year 2019 Outlook:

For the full year 2019, the Company now anticipates adjusted EBITDA to be in the range of $50.0M to $58.0M, with growth heavily weighted to the second half as the overall market improves and elevated inventory levels in the channel are worked down. The Company also anticipates capital expenditures to be about $30.0M for the full year 2019. The Company continues to expect to build cash from operations over the remaining quarters of 2019.

AFI has a market value of $231.17M while its EPS was booked as $-0.95 in the last 12 months. The stock has 26.45M shares outstanding. In the profitability analysis, the company has gross profit margin of 19.30%. Beta value of the company was 2.14; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 3.00.

Loretta Morfin

Loretta Morfin

I am Loretta Morfin and I have over 16 years experience in the financial services industry giving me a vast understanding of how news affects the financial markets. I am an active day trader spending the majority of my time analyzing earnings reports and watching commodities and derivatives. I have a Masters Degree in Economics from Westminster University with previous roles counting Investment Banking. Address: 3966 Euclid Avenue, San Luis Obispo, CA 93401, USA Phone: (+1) 805-361-3810 Email: lorettamorfin@importtourism.com