Ceiling and wall solutions company Armstrong World Industries (NYSE: AWI) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 5.6% year on year to $388.3 million. On the other hand, the company’s full-year revenue guidance of $1.77 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $1.61 per share was 4% below analysts’ consensus estimates.

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“These results represent another strong year for Armstrong with record-setting sales and earnings for both the quarter and the full year as the key fundamental growth drivers of our business – Mineral Fiber average unit value growth, productivity and Architectural Specialties sales growth – were on full display,” said Vic Grizzle, President and CEO of Armstrong World Industries.

Company Overview

Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Armstrong World grew its sales at an impressive 11.6% compounded annual growth rate. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Armstrong World’s annualized revenue growth of 11.9% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.

This quarter, Armstrong World’s revenue grew by 5.6% year on year to $388.3 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Armstrong World has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.9%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Armstrong World’s operating margin rose by 3.1 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Armstrong World generated an operating margin profit margin of 23.7%, up 1.4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Armstrong World’s EPS grew at a spectacular 15% compounded annual growth rate over the last five years, higher than its 11.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Armstrong World’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Armstrong World’s operating margin expanded by 3.1 percentage points over the last five years. On top of that, its share count shrank by 9.8%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Armstrong World, its two-year annual EPS growth of 18% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q4, Armstrong World reported adjusted EPS of $1.61, up from $1.50 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Armstrong World’s full-year EPS of $7.41 to grow 13.8%.

Key Takeaways from Armstrong World’s Q4 Results

It was good to see Armstrong World provide full-year revenue guidance that slightly beat analysts’ expectations. On the other hand, its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 1.3% to $190.36 immediately after reporting.

Armstrong World may have had a tough quarter, but does that actually create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).