UPDATE 3-Armstrong World sees weak FY2010; shares fall

* Q4 adj EPS from cont. ops $0.22 vs est $0.27/shr

* Q4 revenue falls 8 pct

* FY2010 adj EPS $1.20-$1.50 vs est $1.80/shr

* Shares fall as much as 9 pct (Adds analyst comments, share movement)

By Bhaswati Mukhopadhyay

BANGALORE, March 1 (Reuters) - Building products company Armstrong World Industries Inc (AWI.N) reported a lower-than-expected quarterly profit, hurt by lower sales volumes, and forecast 2010 profit below market expectations, sending its shares down 9 percent.

Armstrong World -- which makes flooring products, ceiling systems, and kitchen and bathroom cabinets -- said macroeconomic forecasts indicate a tough outlook for many key markets in 2010.

The company said declines in North American residential markets are estimated to be up to 5 percent, along with a drop in renovation activity. Armstrong World draws about 40 percent of its total sales from the North American residential market.

Sales of previously owned homes in the United States unexpectedly plunged in January, indicating that the housing market has yet to find stable ground. [ID:nN26246086] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ^ For a graphic showing U.S. existing home sales click on: here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ^

The company said North American commercial markets are expected to decline about 10 percent.

In the commercial market, most of the company's revenue comes from four major segments of commercial building -- office, education, retail and healthcare.

The company is positioned in categories that are deeply cyclical and people who own the stock realized today that it would take longer-than-expected for things to turn around, analyst David MacGregor of Longbow Research said.

Armstrong World, which competes with American Woodmark Corp (AMWD.O), Masco Corp (MAS.N) and Mohawk Industries (MHK.N), sees 2010 adjusted earnings of $1.20 to $1.50 per share.

It expects revenue of $2.65 billion to $2.85 billion for the period.

Analysts on average were expecting earnings of $1.80 per share, on revenue of $2.76 billion, according to Thomson Reuters I/B/E/S.

The analyst said the building products segment has been generating most of the company's earnings, while the other three segments seem be at or around breakeven. "Operating income in the building products segment fell to $23.6 million from $38.8 million year-over-year. So, the one segment that people could count on for earnings is declining rapidly and that gets us to the outlook number being low," analyst MacGregor said.

The company also said European markets are expected to decline at least 5 percent.

SALES SLIP

For the fourth quarter, net loss from continuing operations was $3.8 million, or 7 cents a share, compared with a net loss of $26.2 million, or 46 cents a share, a year ago.

On an adjusted basis, net income from continuing operations was 22 cents a share.

Net sales fell 8 percent to $653.0 million. Building products sales fell 13 percent to $260.0 million, while cabinets sales were down 10 percent.

Analysts on average were expecting earnings of 27 cents a share, on revenue of $654.8 million.

Armstrong World said declines in most commercial markets continued.

Shares of Armstrong were down $2.34 at $34.48 in morning trade on the New York Stock Exchange. They earlier touched a low of $33.66. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Vinu Pilakkott, Ratul Ray Chaudhuri)