Beacon's (BECN) Q1 Earnings Top, Revenues Miss, Stock Down

CMG BECN CHUY ARCO

Beacon Roofing Supply, Inc. (BECN - Free Report) reported mixed results for first-quarter 2023 wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, revenues increased but earnings declined.

Shares of the company plunged almost 4% in the after-hours trading session on May 4, post the earnings release.

Earnings & Revenue Discussion

This distributor of building products reported adjusted earnings of 67 cents per share, which topped the consensus mark of 61 cents by 9.8%. Adjusted earnings were however down 24.7% from 89 cents per share reported in the prior-year quarter.

For the quarter, net sales of $1,732.3 million missed the consensus mark of $1,776.6 million by 2.5%. The top line grew 2.7% on a year-over-year basis, driven by solid execution on the Ambition 2025 growth program, including acquisitions and opening of greenfield locations, as well as strong pricing.

During the quarter, the weighted-average selling price increased approximately 9-10% but volumes reduced 11-12%.

Sales According to Line of Business

Residential Roofing Product: For the reported quarter, sales of this product line (comprising 49% of quarterly net sales) were $849.8 million, up 0.4% from the prior year.

Non-Residential Roofing Product: Sales (comprising 26% of the quarterly net sales) declined 7.8% from the year-ago quarter to $449.6 million.

Complementary Product: For the quarter, sales of this product line (comprising 25% of quarterly net sales) increased 22.7% year over year to $432.9 million.

Operating Highlights

The gross margin of 25.5% was down 60 basis points (bps) year over year due to higher product costs, reflective of inventory profit roll-off in a stable pricing environment, majorly offset by higher average selling prices of the company’s products.

Adjusted operating margin increased to 20.6% from 19.2% a year ago, owing to increases done to support new and acquired branches.

Adjusted EBITDA declined 19% on a year-over-year basis to $113 million due to higher operating expenses and costs. Adjusted EBITDA margin contracted 180 bps year over year to 6.5%.

Other Financial Details

As of Mar 31, 2023, the company had cash and cash equivalents of $74.2 million compared with $67.7 million at 2022-end and $52.4 million at March 2022-end. Long-term debt, net was $1,604.8 million, slightly down from the 2022-end value of $1,606.4 million and $1,611.2 million as of Mar 31, 2022.

Net cash provided by operating activities was $101.2 million in first quarter versus net cash used in operating activities of $162 million in the year-ago quarter.

Q2 View

In the second quarter of 2023, the company expects net sales to decrease approximately 2% on a year-over-year basis. The gross margin is expected to be in the mid-to-high 25%.

2023 Guidance Retained

Net sales growth is anticipated to be between 2% and 4% for 2023.

Adjusted EBITDA is expected to be in the range of $810 million to $870 million.

Continuous investments in greenfield locations are expected to yield 15 new locations in 2023.

Zacks Rank & Key Picks

Beacon Roofing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.

Chipotle Mexican Grill, Inc. (CMG - Free Report) sports a Zacks Rank #1. CMG has a long-term earnings growth rate of 31.8%. The shares of the company have risen 45.6% in the past six months.

The Zacks Consensus Estimate for CMG’s 2023 sales and EPS suggests growth of 13.8% and 32.6%, respectively, from the year-ago period’s levels.

Arcos Dorados Holdings Inc. (ARCO - Free Report) currently sports a Zacks Rank #1. ARCO has a long-term earnings growth rate of 7.8%. The shares of the company have gained 5.9% in the past six months.

The Zacks Consensus Estimate for ARCO’s 2023 sales suggests growth of 13.4% from the year-ago period’s levels.

Chuy's Holdings, Inc. (CHUY - Free Report) carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of the company have increased 12.2% in the past six months.

The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 10.9% and 19%, respectively, from the year-ago period’s levels.

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