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TopBuild (BLD) Stock Down Even as Q3 Earnings Beat Estimates

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TopBuild Corp. (BLD - Free Report) reported better-than-expected results for third-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.

However, following the earnings release, shares of this leading installer and distributor of insulation and building material products slipped 2.1% during trading hours on Nov 3. Investors’ sentiments might have been impacted by the company’s inability to provide its revenue and EBITDA guidance for 2020 due to uncertainty related to the COVID-19 pandemic. Nonetheless, it remains bullish about the long-term health of the residential and commercial markets served.

In this regard, Jerry Volas, chief executive officer of TopBuild, stated, “We are pleased with our overall results that included strong adjusted operating and EBITDA margins. Looking ahead, we are bullish on the overall fundamentals of our end markets and our ability to leverage our size and scale to drive market share.”

TopBuild Corp. Price, Consensus and EPS Surprise


TopBuild Corp. Price, Consensus and EPS Surprise

TopBuild Corp. price-consensus-eps-surprise-chart | TopBuild Corp. Quote

Inside the Headlines

The company reported adjusted earnings of $2.10 per share, which surpassed the consensus estimate of $1.75 by 20% and grew 37.3% from the prior-year period.

Total net sales of $697.2 million missed the consensus mark of $703 million by 0.9%. However, the top line grew 2.2% on a year-over-year basis on the back of increased volume and sales from acquisitions.

Segmental Performance

During the third quarter, Installation (TruTeam) revenues decreased 1.2% year over year to $492.2 million. Acquisitions and selling price added 0.9% and 1.2% to revenues, respectively. Volumes fell 3.4% from the prior-year quarter. Adjusted operating margin for the quarter expanded 300 basis points (bps) to 17%.

During the quarter, revenues at the Distribution (Service Partners) segment grew 10.5% year over year to $244.1 million, driven by 12.2% volume growth, partially offset by a 1.7% selling price decline. Operating margin improved 280 bps from the year-ago level to 13.4%.

Operating Highlights

Adjusted gross margin of 28.5% expanded 220 bps. Adjusted operating profit of $101.7 million also increased 26.2% year over year. Adjusted operating margin improved 280 bps from the year-ago period to 14.6%. Notably, the gross margin improvements were driven by operational efficiencies, savings from cost-reduction initiatives, material deflation and lower insurance costs, while operating margin improvements included the aforementioned factors along with reduced travel and entertainment activity.

Adjusted EBITDA during the third quarter grew 21.6% from the year-ago quarter to $119.2 million. Adjusted EBITDA margin improved 270 bps to 17.1% for the quarter.

Financial Update

As of Sep 30, 2020, cash and cash equivalents were $315.3 million, up from $184.8 million at 2019-end. The company has $389.6 million of borrowing capacity available under its revolving facility.

During the third quarter, long-term debt came in at $688.9 million, compared with $698 million at 2019-end. In the first nine months of 2020, net cash provided by operating activities was $255.7 million compared with $182.8 million a year ago.

During the third quarter, the company repurchased 57,810 shares for $155.63 per share. As of Sep 30, 2020, $46 million remained under the $200-million stock repurchase authorization.

Other Updates

On Oct 1, 2020, the company acquired Garland Insulating, an insulation installation company in Texas.

Meanwhile, TopBuild has announced three acquisitions year to date, thereby expecting $79 million in annual revenue additions.

Zacks Rank & Peer Releases

TopBuild currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Rentals, Inc. (URI - Free Report) reported third-quarter 2020 results, wherein earnings and revenues topped the Zacks Consensus Estimate. Adjusted earnings of $5.40 per share topped the consensus estimate of $4.33 by 24.7%. However, the bottom line declined 9.4% from the prior-year figure. Total revenues of $2.19 billion surpassed the consensus mark of $2.14 billion by 2.3%. However, the top line declined 12.1% year over year.

Aegion Corporation (AEGN - Free Report) reported third-quarter 2020, wherein earnings beat the Zacks Consensus Estimate, while revenues missed the same. Adjusted earnings per share of 32 cents topped the consensus mark of 29 cents by 10.3%. However, the bottom line declined 20% from the year-ago figure of 40 cents. Revenues of $275.9 million missed the consensus mark of $281 million by 1.8%. Also, the reported figure was down 10.7% on a year-over-year basis.

Masco Corporation (MAS - Free Report) reported impressive third-quarter 2020 results, wherein the top and the bottom line not only beat the Zacks Consensus Estimate but also improved year over year. Adjusted earnings of $1.04 per share topped the consensus mark of 79 cents and surged 73% year over year. Meanwhile, net sales of $1,983 million topped the consensus estimate of $1,850.9 million and grew 16% on a year-over-year basis.

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