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Construction Partners (ROAD) Gains 4.6% on Q3 Earnings Beat

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Construction Partners, Inc.’s (ROAD - Free Report) shares jumped 4.6% on Aug 7, after it reported better-than-expected earnings for the third quarter of fiscal 2020 (ended Jun 30, 2020). The upside was primarily driven by vertical integration synergies, lower costs of fuel, effective utilization of crews and equipment, a disciplined project bidding strategy, as well as the pricing of its integrated products. Notably, the company lifted its adjusted EBITDA and net income guidance for fiscal 2020.

However, earnings and revenues declined from the year-ago level due to COVID-19-related impacts.

Ned N. Fleming, III, Construction Partners’ executive chairman said, “With our geographically diverse footprint across the Southeast and vertically integrated business model, we believe that we are well-positioned to continue to execute on our proven strategy for long-term growth and value creation."

Earnings & Revenue Discussion

Construction Partners reported earnings of 30 cents per share, which topped the Zacks Consensus Estimate of 24 cents by 25%. The figure fell 9.1% from the year-ago level of 33 cents per share due to lower gross profit, and higher general and administrative expenses.

Construction Partners, Inc. Price, Consensus and EPS Surprise

Construction Partners, Inc. Price, Consensus and EPS Surprise

Construction Partners, Inc. price-consensus-eps-surprise-chart | Construction Partners, Inc. Quote

Revenues of $217 million missed the consensus mark of $234 million by 7.3%. The reported figure decreased 4.5% year over year owing to reduced number of projects in certain markets served, including North Carolina, partially offset by 4.5% contribution from acquisitions.

Operational Highlights

Gross profit came in at $36.5 million for the quarter, down 4.2% year over year. Gross margin of 16.8% remained almost on par with the year-ago period. Operating margin contracted 60 basis points (bps) from a year ago. Adjusted EBITDA margin for the quarter was 14.7%, which reflects a 90 bps improvement from the prior-year figure of 13.8%, mainly driven by higher depreciation, depletion and amortization of long-lived assets.

Backlog

Project backlog as of Jun 30, 2020 was $651.2 million, up from $579.1 million sequentially and $581.1 million on Jun 30, 2019.

Financial Position

The company had cash and cash equivalents of $78.7 million as of Jun 30, 2020, up from $80.6 million on fiscal 2019-end. Net cash provided by operating activities — net of acquisition — was $51.4 million for the first nine months of fiscal 2020, significantly up from $18 million reported a year ago.

It currently has $19.3 million available under the revolving credit facility after reduction for outstanding letters of credit.

Fiscal 2020 Guidance Updated

The company expects revenues between $810 million and $820 million compared with $820-$830 million expected earlier. This indicates an increase from fiscal 2019 revenues of $783.24 million. Adjusted EBITDA is expected within $92-$94.5 million, reflecting an increase from $88-$91 projected earlier.

Net income is likely to be in the range of $36-$38 million compared with $32-$34 million anticipated earlier.

Zacks Rank & Peer Releases

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

Gibraltar Industries, Inc. (ROCK - Free Report) reported better-than-expected results for second-quarter 2020. The company’s earnings and sales not only topped analysts’ expectations but also improved year over year on persistent strength across the business, particularly in the Renewable Energy & Conservation and Residential Products units.

TopBuild Corp. (BLD - Free Report) reported better-than-expected results for second-quarter 2020. Its earnings not only surpassed the Zacks Consensus Estimate but also grew impressively from the prior-year quarter, backed by margin improvement in both the segments.

Masco Corporation (MAS - Free Report) reported impressive results for second-quarter 2020, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Strong Decorative Architectural Products and North American Plumbing segments helped it deliver better-than-expected results.

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