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Beacon Roofing Supply, Inc. (BECN - Free Report) exceeded expectations in its first-quarter 2024 report, with both earnings and net sales surpassing the Zacks Consensus Estimate. While the company experienced an increase in its top line, there was a decline in earnings per share (EPS) compared to the previous year. However, BECN showcased consistent net sales growth over the last 13 quarters, underscoring the robustness of its business model.
BECN's Ambition 2025 initiatives, focusing on organic and inorganic growth, have boosted its performance. Recent highlights include acquiring Smalley & Company to strengthen its waterproofing platform, expanding with 23 branches and five greenfield locations since the end of the fourth quarter of 2023, and gearing up for the construction season to meet customer demands. The company anticipates continued market support, driven by non-discretionary repair and reroofing demand.
Shares of the company gained 1.5% in the after-hour trading session on May 2.
Earnings & Sales Discussion
This distributor of building products reported adjusted earnings per share of 41 cents, which topped the consensus mark of 35 cents by 17.1% but decreased 38.8% from the year-ago adjusted level of 67 cents per share.
Net sales of $1.91 billion also topped the consensus mark of $1.88 billion by 1.8%. The top line increased 10.4% on a year-over-year basis, primarily fueled by an increase in organic volume, including contributions from newly established branches.
Estimated organic volumes, which encompass greenfield projects, saw a rise of approximately 6-7%, while the weighted-average selling price experienced a slight increase of 0-1%. Furthermore, the inclusion of acquired branches accounted for more than 3% of the overall increase in net sales during the first quarter.
Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise
Residential Roofing Product: In the reported quarter, sales of this product line (comprising 48.5% of quarterly net sales) were $927.4 million, up 9.1% from the year-ago quarter (well above our expectation of 8.8% growth). The upside was primarily driven by higher volumes.
Non-Residential Roofing Product: Sales (comprising 27.6% of the quarterly net sales) rose 17.6% from the year-ago quarter to $528.6 million owing to strong underlying market demand. Our model had predicted this segment sales to grow 7.6% in the quarter.
Complementary Product: In the first quarter, sales of this product line (comprising 23.9% of quarterly net sales) increased 5.4% year over year (above our expectation of 4.7% growth) to $456.4 million. The rise in sales primarily stemmed from an uptick in waterproofing volumes and the acquisition of additional waterproofing companies since Mar 31, 2023. However, this was partly mitigated by a slight downturn in siding sales attributable to decreased volumes.
Operating Highlights
The gross margin of 24.7% was down 80 basis points (bps) year over year. This decrease was attributed to slightly elevated product costs and a greater proportion of non-residential products in the mix, which offset the gains from higher average selling prices across the product range.
Adjusted EBITDA dropped 8.8% on a year-over-year basis to $103.1 million, driven by aforementioned headwinds. Adjusted EBITDA margin contracted 110 bps year over year to 5.4%.
Other Financial Details
As of Mar 31, 2024, the company had cash and cash equivalents of $134.6 million, up from $84 million at 2023-end. Long-term debt, net was $2.49 billion, up from the 2023-end value of $2.19 billion.
Net cash used in operating activities was $140.8 million in the first quarter compared with $101.2 million cash provided by operating activities in the prior-year quarter.
Guidance
For the second quarter of 2024, the company anticipates net sales per day to be up in the high single digits from the year-ago period. Gross margin is expected to be approximately 26% versus 25.4% a year ago. In April 2024, net sales per day were up about 7% year over year.
For 2024, net sales growth is anticipated to be in the mid-single digits year over year. Gross margin is expected to be in the mid-25% range. Adjusted EBITDA is now expected to be in the range of $930-$990 million versus earlier expectation of $920-$980 million.
Despite lower storm volume projections and the impact of higher interest rates on housing, Beacon remains optimistic about sustained demand for residential non-discretionary repair and re-roofing. Additionally, the company sees opportunities to improve commercial sentiment, although it acknowledges the challenges posed by the ABI reading remaining below 50.
Continuous investments in greenfield locations are expected to yield 25 new locations in 2024.
Zacks Rank and Stocks to Consider
Beacon currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector are:
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 213.4% on average. Shares of EAT have gained 39.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 33.9% growth, respectively, from the year-ago levels. EPS estimates for 2024 have increased to $3.79 from $3.71 over the past seven days.
The Gap, Inc. (GPS - Free Report) currently carries a Zacks Rank of 2 (Buy). It has a trailing four-quarter earnings surprise of 180.9%, on average. The stock has risen 151.1% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales and EPS implies a decline of 0.3% and 4.9%, respectively, from the year-ago levels. EPS estimates for fiscal 2024 have increased to $1.36 from $1.20 over the past 60 days.
GMS Inc. (GMS - Free Report) currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 3.1%, on average. Shares of GMS have surged 69.5% in the past year.
The Zacks Consensus Estimate for GMS’ 2024 EPS has increased to $8.36 from $8.35 over the past 60 days. The Zacks Consensus Estimate for GPS’ fiscal 2024 sales implies growth of 3.3% but a decline of 10% for EPS from the year-ago levels.
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Beacon (BECN) Q1 Earnings & Sales Beat, Shares Rise
Beacon Roofing Supply, Inc. (BECN - Free Report) exceeded expectations in its first-quarter 2024 report, with both earnings and net sales surpassing the Zacks Consensus Estimate. While the company experienced an increase in its top line, there was a decline in earnings per share (EPS) compared to the previous year. However, BECN showcased consistent net sales growth over the last 13 quarters, underscoring the robustness of its business model.
BECN's Ambition 2025 initiatives, focusing on organic and inorganic growth, have boosted its performance. Recent highlights include acquiring Smalley & Company to strengthen its waterproofing platform, expanding with 23 branches and five greenfield locations since the end of the fourth quarter of 2023, and gearing up for the construction season to meet customer demands. The company anticipates continued market support, driven by non-discretionary repair and reroofing demand.
Shares of the company gained 1.5% in the after-hour trading session on May 2.
Earnings & Sales Discussion
This distributor of building products reported adjusted earnings per share of 41 cents, which topped the consensus mark of 35 cents by 17.1% but decreased 38.8% from the year-ago adjusted level of 67 cents per share.
Net sales of $1.91 billion also topped the consensus mark of $1.88 billion by 1.8%. The top line increased 10.4% on a year-over-year basis, primarily fueled by an increase in organic volume, including contributions from newly established branches.
Estimated organic volumes, which encompass greenfield projects, saw a rise of approximately 6-7%, while the weighted-average selling price experienced a slight increase of 0-1%. Furthermore, the inclusion of acquired branches accounted for more than 3% of the overall increase in net sales during the first quarter.
Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise
Beacon Roofing Supply, Inc. price-consensus-eps-surprise-chart | Beacon Roofing Supply, Inc. Quote
Sales According to Line of Business
Residential Roofing Product: In the reported quarter, sales of this product line (comprising 48.5% of quarterly net sales) were $927.4 million, up 9.1% from the year-ago quarter (well above our expectation of 8.8% growth). The upside was primarily driven by higher volumes.
Non-Residential Roofing Product: Sales (comprising 27.6% of the quarterly net sales) rose 17.6% from the year-ago quarter to $528.6 million owing to strong underlying market demand. Our model had predicted this segment sales to grow 7.6% in the quarter.
Complementary Product: In the first quarter, sales of this product line (comprising 23.9% of quarterly net sales) increased 5.4% year over year (above our expectation of 4.7% growth) to $456.4 million. The rise in sales primarily stemmed from an uptick in waterproofing volumes and the acquisition of additional waterproofing companies since Mar 31, 2023. However, this was partly mitigated by a slight downturn in siding sales attributable to decreased volumes.
Operating Highlights
The gross margin of 24.7% was down 80 basis points (bps) year over year. This decrease was attributed to slightly elevated product costs and a greater proportion of non-residential products in the mix, which offset the gains from higher average selling prices across the product range.
Adjusted EBITDA dropped 8.8% on a year-over-year basis to $103.1 million, driven by aforementioned headwinds. Adjusted EBITDA margin contracted 110 bps year over year to 5.4%.
Other Financial Details
As of Mar 31, 2024, the company had cash and cash equivalents of $134.6 million, up from $84 million at 2023-end. Long-term debt, net was $2.49 billion, up from the 2023-end value of $2.19 billion.
Net cash used in operating activities was $140.8 million in the first quarter compared with $101.2 million cash provided by operating activities in the prior-year quarter.
Guidance
For the second quarter of 2024, the company anticipates net sales per day to be up in the high single digits from the year-ago period. Gross margin is expected to be approximately 26% versus 25.4% a year ago. In April 2024, net sales per day were up about 7% year over year.
For 2024, net sales growth is anticipated to be in the mid-single digits year over year. Gross margin is expected to be in the mid-25% range. Adjusted EBITDA is now expected to be in the range of $930-$990 million versus earlier expectation of $920-$980 million.
Despite lower storm volume projections and the impact of higher interest rates on housing, Beacon remains optimistic about sustained demand for residential non-discretionary repair and re-roofing. Additionally, the company sees opportunities to improve commercial sentiment, although it acknowledges the challenges posed by the ABI reading remaining below 50.
Continuous investments in greenfield locations are expected to yield 25 new locations in 2024.
Zacks Rank and Stocks to Consider
Beacon currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector are:
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 213.4% on average. Shares of EAT have gained 39.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 33.9% growth, respectively, from the year-ago levels. EPS estimates for 2024 have increased to $3.79 from $3.71 over the past seven days.
The Gap, Inc. (GPS - Free Report) currently carries a Zacks Rank of 2 (Buy). It has a trailing four-quarter earnings surprise of 180.9%, on average. The stock has risen 151.1% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales and EPS implies a decline of 0.3% and 4.9%, respectively, from the year-ago levels. EPS estimates for fiscal 2024 have increased to $1.36 from $1.20 over the past 60 days.
GMS Inc. (GMS - Free Report) currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 3.1%, on average. Shares of GMS have surged 69.5% in the past year.
The Zacks Consensus Estimate for GMS’ 2024 EPS has increased to $8.36 from $8.35 over the past 60 days. The Zacks Consensus Estimate for GPS’ fiscal 2024 sales implies growth of 3.3% but a decline of 10% for EPS from the year-ago levels.