It has been about a month since the last earnings report for Beacon Roofing Supply (BECN - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Beacon Roofing due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Beacon’s Q3 Earnings & Sales Beat Estimates
Beacon Roofing Supply, Inc. reported impressive third-quarter fiscal 2020 results. The top and bottom lines surpassed the Zacks Consensus Estimate, mainly backed by exceptional operating cost and cash flow performance for the quarter.
Julian Francis, Beacon’s president and chief executive officer said, “Our limited reliance on discretionary product categories and our diverse mix of residential and non-residential markets provides our business with stability in this challenging environment.”
Quarter in Detail
Beacon reported adjusted earnings of 93 cents per share, which topped the consensus mark of 61 cents by 52.5% and grew 1.1% from the year-ago figure of 92 cents. Despite low revenues, aggressive cost-cutting actions — including reduction in both hours worked and headcount, as well as decrease in fleet costs and other discretionary expenditures — aided the bottom line.
Net sales of $1.79 billion surpassed the consensus mark of $1.76 billion by 1.9% but fell 6.9% year over year due to soft demand — especially in April — owing to government mandates, partially offset by stable sales in states/provinces.
Sales of residential roofing products (accounting for 46.7% of net sales), non-residential roofing products (23.8%) and complementary products (29.5%) declined 1.3%, 9.6% and 12.5%, respectively.
Cost of goods sold, as a percentage of net sales, surged 50 basis points (bps) to 75.9%.
SG&A expenses decreased 10.2% year over year. As a percentage of net sales, SG&A improved 60 bps year over year. Adjusted EBITDA declined 6.5% and margin remained flat year over year, reflecting strong operating cost-control measures.
At fiscal third quarter-end, Beacon had cash and cash equivalents of $1,018.4 million, significantly up from $72.3 million at fiscal 2019-end. Long-term debt — net of current portion — was $2.5 billion, almost in line with the last reported quarter and the year-ago figure.
Cash provided to operations was reported at $250.4 million in the first nine months of fiscal 2020 versus $194.9 million cash used in operations a year ago.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates review.
Currently, Beacon Roofing has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, 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.
Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Beacon Roofing has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.