Writing about Armstrong World Industries (NYSE:AWI) in August, I was ambivalent on this leading manufacturer of commercial ceiling tiles and specialty ceiling materials, as I thought the company's strong leadership in its core market was offset by the share valuation and the prospect of weaker renovation activity in 2022 ahead of recovery in non-residential construction.
Since then, the shares have fallen more than 10%, and management's guidance for margins in 2022 was softer than the Street had expected. At the same time, though, the company is showing exceptional pricing power and the company is still leveraged to what I expect will be a meaningful renovation cycle targeting "healthy building" initiatives. If Armstrong can generate long-term revenue growth in the mid-single-digits, free cash flow growth in the high single-digits, and mid-20%'s adjusted operating margins, I see upside of around 20% from here.
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