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Simpson Manufacturing Co., Inc. (SSD - Snapshot Report) reported second-quarter 2013 earnings of 38 cents per share, up 15% from 33 cents in the year-earlier quarter. Results were way ahead of the Zacks Consensus Estimate of 32 cents.

Operational Update

Total revenue increased 7.6% to $195.6 million from $181.7 million in the year-ago quarter, surpassing the Zacks Consensus Estimate of $194 million. The rise was primarily attributable to improved North American sales, due to increased homebuilding activity, partly offset by reduced home center sales and lower selling prices.

Cost of sales increased 7.7% to $106 million from $98.5 million in the prior-year quarter. Gross profit was $89 million, up 7.5% from $83 million in the year-ago quarter. Gross margin was 45.7% compared to 45.8% in the prior-year quarter.

Research and development and engineering expenses increased 4.9% to $9.5 million year over year from $9 million. Selling expenses went up 8.9% to $21.7 million from $19.9 million in the prior-year quarter. General and administrative expenses grew 5.6% to $28.6 million from $27.1 million in the second quarter of 2012, attributable to the replacement of Keymark resulted in the rise of personnel costs.

Income from operations increased 9% year over year to $29.6 million. Consequently, operating margin expanded 20 basis points to 15%.

Segment Performance

Revenues in the North American segment grew 11% to $159.7 million from $144.5 million in the year-ago quarter. Segment gross profit went up 9% to $76 million from $69.7 million in the prior-year quarter.
 
Total revenue for the European segment went down 6% year over year to $32 million, due to the exit of the heavy-duty mechanical anchor business. The region's economic conditions, adverse weather conditions and price decrease also affected sales. Gross profit in the segment was $12.5 million versus $12.7 million in the prior-year quarter, down 1%.

Asia/Pacific segment’s total revenue increased 28% to $3.5 million from $2.7 million in the year-ago quarter. Segment gross profit rose 160% year over year to $0.8 million.

Financial Position

Cash and short-term investments amounted to $165 million as of Jun 30, 2013, up from $162 million as of Jun 30, 2012. The company has no debt on its balance sheet.

Our Take
 
For 2013, Simpson expects gross margin to be in the range of 42–43%. Capital Expenditure is expected around $29–$30 million. Depreciation and amortization expense for the full year is expected to be $27–$28 million.
 
Simpson expects to benefit from its ongoing investments in strategic initiatives, which include an expanded offering of concrete and reinforcing products and systems, particularly specialty chemicals and software offerings.

Pleasanton, Calif.-based Simpson is a leading manufacturer of wood construction products, which includes connectors, truss plates, fastening systems, fasteners and shearwalls. The company, through its subsidiary, Simpson Strong-Tie Company Inc., designs and engineers concrete construction products comprising adhesives, specialty chemicals, mechanical anchors and powder actuated tools.

Simpson currently has a Zacks Rank #3 (Hold).

Other stocks with favorable a Zacks Rank in the building and construction industry are James Hardie Industries plc , Aegion Corporation (AEGN - Snapshot Report) and USG Corporation (USG - Snapshot Report). While James Hardie holds a Zacks Rank #1 (Strong Buy), Aegion Corporation and USG Corporation carry a Zacks Rank #2 (Buy),
 

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