Apogee Enterprises

The architectural building index (ABI) tracks future commercial construction plans, and dipped slightly in January before rebounding in February.  Data for March and April, the two busiest months for building plans, will be available later this spring. Apogee will report fourth-quarter earnings on April 7.Architectural glass maker Apogee Enterprises (NSDQ: APOG) recently elected a new director, Patricia Wagner, the CEO of Sempra U.S. Gas & Power, to help attain Apogee’s goal of $1.3 billion in sales and at least a 12% operating margin for fiscal year 2018, which starts March 2017.

Ethan Allen

Furniture maker Ethan Allen’s (NYSE: ETG) introduction of more contemporary designs and its strategy of using interior designers to boost sales is starting to pay off. Second-quarter sales increased 5.3% over the previous year to $207.5 million. Operating income increased 50.1% to $26.5 million and comprised 12.2% of sales, up from 9.5% last year. Earnings per share of 58 cents improved 70.6% over the previous year’s 34 cents.

Exactech

As part of its continued focus on orthopedics, Exactech (NSDQ: EXAC) launched several new products at the American Academy of Orthopedic Surgeons convention in March. Hip, shoulder and knee replacements now have updated features to improve surgical outcomes.

The company sold its dental biologics business to Salvin Dental Specialties, and in February bought Exactech Australia, the company’s Sydney-based distributor of orthopedic products. Exactech should be able to grow sales faster using a direct sales force in this region.

We are waiting to see if Exactech’s new products can jumpstart earnings’ growth to the mid-teens which would allow us to raise it from a Hold to a Buy. Current estimates call for 12% average growth over the next two years.

Express
Weak earnings in 2014 from clothing it couldn’t sell meant Express (NYSE: EXPR) had to slash prices to move its surplus inventory, and in doing so the company trained its customers to wait for discounts. To change this behavior, CEO David Kornberg reduced the number of sale days 50% in first-quarter 2016 compared with the same quarter a year ago.

Having fewer sales is working. Fourth-quarter earnings per share rose 37% to 67 cents after revenue increased 5% compared with the previous year. Gross product margins also rose, from 30.5% in 2015 to almost 34% in fiscal 2016 because of the fewer markdowns and better pricing on new products.

Cash flow from operations increased $229.6 million, or 47%, from fiscal 2015, with the company paying off all $198 million of its debt. Analysts estimate 18% growth in fiscal 2017, and the stock trades at a relatively low price-to-earnings ratio of 12, leaving room to grow.

Gentex
 A 14% increase in sales of auto-dimming interior and exterior mirrors boosted Gentex Corp.’s (NSDQ: GNTX) revenue 12% in 2015. The company makes automotive mirrors that automatically reduce headlight glare as well as auto-dimming windows for cars and planes. Fourth-quarter sales rose 16% to $405.6 million compared with fourth quarter 2014.

In February, the National Highway Traffic Association approved the company’s full-display mirrors, which convert from a dimmable rearview mirror to a full display rear camera view at the flip of a switch.

Gentex’s full-display mirrors will debut in the new Chevy Volt, Cadillac CT6 and XT5 vehicles, where they will show a feed from the vehicles’ rearview cameras.

The company expects sales to grow 9% to $1.68 billion for 2016.  Earnings estimates reflect the same 9% growth, a number that will need to rise higher for us to raise the stock’s rating from Hold to Buy.

Integrated Device Technology

After a disappointing third-quarter earnings release on Feb. 1, Integrated Device Technology’s (NSDQ: IDTI) stock price fell nearly 27% before rallying 11.5% to $20.21 by mid-March. Although earnings and revenue were in line with estimates, guidance for a weaker-than-expected fourth quarter disappointed investors.

Analysts expect 15% earnings growth in fiscal 2017, a decent increase but significantly below the 45% IDT is likely to report for fiscal 2016 (ends March 2016). We still like the stock, as the current valuation doesn’t incorporate higher growth from automotive and cellphone-charging products.

The company partnered with 5G Lab Germany to research network-connected autonomous vehicles. The project’s core technology is IDT’s RapidIO data communication devices.

IDT’s RapidIO technology will focus on transforming a vehicle into a device that can communicate with other devices and also will attempt to connect multiple vehicle sensors, which are critical for self-driven vehicles or computer-assisted driving.

IDTI also developed a new product with ZMDI that senses UVB light. The product can be used in wearable or mobile devices for health and wellness applications as well as self-dimming screens.

On March 8 the U.S. government banned imports from ZTE, a Chinese maker of telecommunications components. IDTI said its ZTE components equaled a revenue loss of $3 million to $4 million per quarter and estimated a worst-case scenario of $16 million in losses, 2% of total revenue. However, the government reversed its decision a few weeks later and grated ZTE a temporary reprieve until June 30.

Lattice Semiconductor

Lattice Semiconductor (NSDQ: LSCC) hopes to cash in on WiGig, a Wi-Fi that’s becoming popular. Lattice acquired WiGig specialist SiBeam in 2011, and Lattice’s adapters using WiGig from SiBeam will be sold this year.

The company mainly makes programmable logic devices (PLDs) used in computers. Lattice has carved out a niche selling PLDs that are smaller, cheaper and consume less energy than competing products. The industry’s two dominant players, Altera and Xilinx, sell more sophisticated and flexible products that are more expensive.

Fiscal 2015 revenue was up 10.9% to $406 million, but the company lost money due to higher expenses and a write-off of goodwill. Guidance for 2016, however, was in line with expectations.

Lattice is expected to turn the corner this year, with earnings per share rising to 42 cents in 2016 versus a loss of 13 cents last year. EPS should continue on this growth trajectory to 62 cents in fiscal 2017.

While Lattice is one of our riskier picks, the potential is huge if its standards are adopted into more wireless devices. Now that the company’s large acquisition of Silicon Image has been digested, earnings should be on a steady footing.

Chief Financial Officer Joe Bedewi left the company April 2 and Lattice’s Vice President of Finance, Max Downing, will be interim CFO.

On Assignment

The strategy of acquiring smaller staffing firms to maintain a broad selection of talent in industries with high labor turnover has been profitable for On Assignment’s (NYSE: ASGN). Revenue for 2015 rose nearly 20% and net income jumped 26.5% over the previous year.

Fourth-quarter revenue soared 30.9% to $577.5 million and operating income rose 30%. Higher interest payments for the debt used to finance the Creative Circle acquisition left net income flat for the quarter.

Stepan Corp.

Stepan’s 2015 earnings per share was $3.46, with forecasted 2016 EPS of $3.63 and $4.05 for 2017.Cost-cutting in its surfactant business helped Stepan (NYSE: SCL) boost earnings in the fourth quarter.  A new contract with detergent maker Sun Products in July helped diversify Stepan’s products and increase revenue.  Due to the company’s improving product mix, Stepan increased earnings 33% in 2015 despite an 8% decline in revenue.

Surfactants operating income doubled from $12 million in fourth-quarter 2014 to $24.3 million in 2015 as a result of the restructuring and new supply agreement with Sun Products. Free cash flow rose to $64 million in 2015 from -$20 million last year thanks to higher profits, faster collection of receivables and a smaller buildup of inventory.

Weyco Group

Weyco Group (NSDQ: WEYS) is in the midst of a turnaround. It reversed the decline of its men’s shoe brands with $2 million of additional advertising and updated styling. The company’s shoes, which are sold under the Florsheim, Nunn Bush and Stacy Adams brands, all reported flat to slightly higher sales in 2015, with Stacy Adams sales increasing $6 million, or almost 10% over the prior year.

Bogs, the company’s winter and wet-weather boots, typically experience their strongest sales in the third and fourth quarters of the year. Warm weather hurt Bogs fourth-quarter sales, but management believes the company will be able to clear its inventory without offering many discounts. Sales declined 21% in the fourth quarter after increasing 20% for the first nine months of the year.

We currently have a Hold on Weyco. At current levels the stock trades at a PE of 14 times 2017 estimates for earnings, which are expected to increase only 8%. We will be monitoring the company to see if we can justify a higher growth rate for earnings and will notify subscribers if our position changes.