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Builders FirstSource (BLDR) Up 14.8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 14.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Builders FirstSource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Builders FirstSource Q3 Earnings & Revenue Beat
Builders FirstSource released its third-quarter 2022 results, wherein it reported 6.9% core organic sales growth. The company’s earnings and net sales surpassed the Zacks Consensus Estimate and increased year over year. The results were driven by an increase in net sales in value-added product categories, gross margin as well as contributions from acquisitions amid continuous raw material supply woes.
Dave Flitman, President and CEO of Builders FirstSource, said, “While we have begun to experience increasing macro headwinds, our leading position in the market, focus on innovation and prudent capital allocation have positioned us to succeed in any environment. I am confident that we will continue to deliver on our strategic pillars given the skill and dedication of our team members.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $5.20 per share, which handily topped the consensus mark of $3.53. The reported figure also increased by 16.8% from the year-ago quarter.
For the quarter, net sales of $5.8 billion surpassed the consensus mark of $5.2 billion. The top line grew 4.6% on a year-over-year basis. Core organic sales grew 6.9% from the prior-year quarter. Commodity price deflation impacted 7.5% of net sales. Acquisitions added 5.2% to net sales growth. The upside was led by solid demand for its products amid supply woes.
Notably, core organic sales in value-added products increased 19.9% compared with the prior-year period. Core organic customer growth in Single Family increased 1.8%, while R&R/Other and Multi-Family grew 31.1% and 16.2% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 48.1% of the quarterly net sales) were $2.77 billion, up 29.4% from the prior year.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 20.3% of the quarterly net sales) increased 22.2% from the year-ago quarter to $1.17 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 31.5% of the quarterly net sales) decreased 24.5% year over year to $1.82 billion.
Operating Highlights
Gross profit for the quarter increased 17.6% year over year to $2 billion. Gross margin of 35% expanded 390 basis points (bps) year over year, owing to higher sales in value-added product categories and disciplined pricing in a supply-constrained marketplace. As a percentage of net sales, total SG&A expenses increased 150 bps to 17.4%.
Adjusted EBITDA increased 20.1% on a year-over-year basis to $1.17 billion, primarily driven by higher sales, pricing and more mix of sales from value-added product categories. Adjusted EBITDA margin expanded 260 bps year over year to 20.3%.
Other Financial Details
As of Sep 30, 2022, Builders FirstSource had cash and cash equivalents of $85 million compared with $42.6 million at 2021-end. Long-term debt — net of current portion, discounts and issuance costs — was $3.17 billion, up from $2.93 billion at 2021-end.
The company had liquidity of $1.3 billion at September 2022-end, consisting of approximately $1.2 billion in net borrowing availability under the revolving credit facility and cash on hand. During the quarter, BLDR repurchased 11.2 million shares of its stock for $658.2 million.
Guidance
For 2022, BLDR expects sales to range between $22.5 billion and $23 billion. This represents 13-16% year-over-year growth. Adjusted EBITDA is expected to be between $4.2 billion and $4.4 billion, representing 35-42% year-over-year growth. EBITDA margin will likely range from $18.5% to 19.5%. This is 310-410 bps improvement from the 2021 level.
For 2022, the company now expects free cash flow between $3.1 and $3.3 billion versus $2.5-$3 billion expected earlier. Interest expense is expected to be in the range of $190 million to $200 million (versus $175-$185 million expected earlier). BLDR projects an effective tax rate between 23% and 25%, total capital expenditures between $250 million and $300 million, and depreciation and amortization expenses between $480 million and $500 million for 2022. Acquisitions will likely contribute to net sales growth between 7% and 8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 43.84% due to these changes.
VGM Scores
Currently, Builders FirstSource has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Builders FirstSource belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Beacon Roofing Supply (BECN - Free Report) , has gained 4.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Beacon Roofing reported revenues of $2.42 billion in the last reported quarter, representing a year-over-year change of +28.8%. EPS of $2.25 for the same period compares with $1.53 a year ago.
For the current quarter, Beacon Roofing is expected to post earnings of $1.29 per share, indicating a change of +0.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.9% over the last 30 days.
Beacon Roofing has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Builders FirstSource (BLDR) Up 14.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 14.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Builders FirstSource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Builders FirstSource Q3 Earnings & Revenue Beat
Builders FirstSource released its third-quarter 2022 results, wherein it reported 6.9% core organic sales growth. The company’s earnings and net sales surpassed the Zacks Consensus Estimate and increased year over year. The results were driven by an increase in net sales in value-added product categories, gross margin as well as contributions from acquisitions amid continuous raw material supply woes.
Dave Flitman, President and CEO of Builders FirstSource, said, “While we have begun to experience increasing macro headwinds, our leading position in the market, focus on innovation and prudent capital allocation have positioned us to succeed in any environment. I am confident that we will continue to deliver on our strategic pillars given the skill and dedication of our team members.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $5.20 per share, which handily topped the consensus mark of $3.53. The reported figure also increased by 16.8% from the year-ago quarter.
For the quarter, net sales of $5.8 billion surpassed the consensus mark of $5.2 billion. The top line grew 4.6% on a year-over-year basis. Core organic sales grew 6.9% from the prior-year quarter. Commodity price deflation impacted 7.5% of net sales. Acquisitions added 5.2% to net sales growth. The upside was led by solid demand for its products amid supply woes.
Notably, core organic sales in value-added products increased 19.9% compared with the prior-year period. Core organic customer growth in Single Family increased 1.8%, while R&R/Other and Multi-Family grew 31.1% and 16.2% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 48.1% of the quarterly net sales) were $2.77 billion, up 29.4% from the prior year.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 20.3% of the quarterly net sales) increased 22.2% from the year-ago quarter to $1.17 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 31.5% of the quarterly net sales) decreased 24.5% year over year to $1.82 billion.
Operating Highlights
Gross profit for the quarter increased 17.6% year over year to $2 billion. Gross margin of 35% expanded 390 basis points (bps) year over year, owing to higher sales in value-added product categories and disciplined pricing in a supply-constrained marketplace. As a percentage of net sales, total SG&A expenses increased 150 bps to 17.4%.
Adjusted EBITDA increased 20.1% on a year-over-year basis to $1.17 billion, primarily driven by higher sales, pricing and more mix of sales from value-added product categories. Adjusted EBITDA margin expanded 260 bps year over year to 20.3%.
Other Financial Details
As of Sep 30, 2022, Builders FirstSource had cash and cash equivalents of $85 million compared with $42.6 million at 2021-end. Long-term debt — net of current portion, discounts and issuance costs — was $3.17 billion, up from $2.93 billion at 2021-end.
The company had liquidity of $1.3 billion at September 2022-end, consisting of approximately $1.2 billion in net borrowing availability under the revolving credit facility and cash on hand.
During the quarter, BLDR repurchased 11.2 million shares of its stock for $658.2 million.
Guidance
For 2022, BLDR expects sales to range between $22.5 billion and $23 billion. This represents 13-16% year-over-year growth. Adjusted EBITDA is expected to be between $4.2 billion and $4.4 billion, representing 35-42% year-over-year growth. EBITDA margin will likely range from $18.5% to 19.5%. This is 310-410 bps improvement from the 2021 level.
For 2022, the company now expects free cash flow between $3.1 and $3.3 billion versus $2.5-$3 billion expected earlier. Interest expense is expected to be in the range of $190 million to $200 million (versus $175-$185 million expected earlier). BLDR projects an effective tax rate between 23% and 25%, total capital expenditures between $250 million and $300 million, and depreciation and amortization expenses between $480 million and $500 million for 2022. Acquisitions will likely contribute to net sales growth between 7% and 8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 43.84% due to these changes.
VGM Scores
Currently, Builders FirstSource has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Builders FirstSource belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Beacon Roofing Supply (BECN - Free Report) , has gained 4.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Beacon Roofing reported revenues of $2.42 billion in the last reported quarter, representing a year-over-year change of +28.8%. EPS of $2.25 for the same period compares with $1.53 a year ago.
For the current quarter, Beacon Roofing is expected to post earnings of $1.29 per share, indicating a change of +0.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.9% over the last 30 days.
Beacon Roofing has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.