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Gibraltar (ROCK) Stock Down as Q4 Earnings Lag Estimates

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Gibraltar Industries, Inc. (ROCK - Free Report) reported fourth-quarter 2020 results, with earnings and revenues missing the Zacks Consensus Estimate. However, the top and the bottom line increased on a year-over-year basis.

Following the results, shares of the company fell 7.6% during trading hours on Feb 25. Notably, negative investor sentiments were witnessed as the company provided lower-than-expected 2021 guidance.

Nonetheless, management continues to be optimistic regarding long-term growth potential. In this regard, president and chief executive officer of Gibraltar, Bill Bosway stated, “Although we are dealing with challenging short term market dynamics, I am confident we will deliver full year growth and margin expansion in 2021.”

Gibraltar Industries, Inc. Price, Consensus and EPS Surprise

 

Gibraltar Industries, Inc. Price, Consensus and EPS Surprise

Gibraltar Industries, Inc. price-consensus-eps-surprise-chart | Gibraltar Industries, Inc. Quote

 

Inside the Headlines

In the fourth quarter, Gibraltar reported adjusted earnings of 59 cents per share, missing the Zacks Consensus Estimate of 63 cents by 6.4%. However, the bottom line increased 3.5% year over year, supported by growth in the Residential Products segments, favorable alignment of price to material costs and benefits from operational excellence initiatives.

Quarterly net sales of $265.2 million missed the consensus mark of $283 million. However, the top line increased 17.3% year over year owing to 3.6% organic growth driven by its Residential Products and Renewable Energy & Conservation segments. Acquisitions contributed 13.7% to the top line.

The company’s backlog was approximately $300 million (at quarter-end), up 50% year over year owing to solid demand in the Renewable Energy and Conservation segment.

Segmental Details

Residential Products: Net sales in the segment increased 26.7% from the year-ago quarter’s period to $128.2 million for the quarter. The upside was primarily caused by solid activity in the home improvement market.

Adjusted operating margins improved 280 basis points (bps) year over year to 15.9%. Notably, strong execution and 80/20 simplification initiatives aided margins during the fourth quarter.

Infrastructure Products: Sales in the segment declined 7.5% year over year to $12.4 million. The downside was primarily caused by pandemic-induced delays in existing and new project schedules.

Nonetheless, adjusted operating margins expanded 60 bps to 6.4%, backed by solid execution in fabricated product sales. However, this was partially offset by a decline in higher margin non-fabricated product lines. During the fourth quarter, the segment’s backlog improved modestly. On Feb 23, 2021, the company completed the sale of Industrial business.

Renewable Energy and Conservation: Quarterly net sales in the segment increased 11.8% year over year to $124.6 million. Notably, the upside can be primarily attributed to growth in Renewable Energy and previous acquisitions in the Conservation business, offset by a slowdown in the cannabis and hemp markets. During the quarter, solar customers witnessed unanticipated solar panel supply challenges and building permit delays, thereby causing temporary delays to projects.

Meanwhile, segment backlog rose 55% year over year owing to strong demand at both solar energy and organic produce. However, adjusted operating margins of 9.7% in the segment indicated a decline of 550 bps during the fourth quarter. The downside was primarily caused by a reduction in solar volume projects along with slower greenhouse structures and processing equipment market for cannabis and hemp.

Costs & Margins

During the fourth quarter, selling, general and administrative expenses increased 6.8% year over year to $39.7 million. As a percentage of sales, the metric fell 150 bps year over year to 15%. Meanwhile, adjusted operating margin contracted 100 bps year over year to 9.6%.

Balance Sheet & Cash Flow

As of Dec 31, 2020, Gibraltar had cash and cash equivalents worth $32.1 million compared with $191.4 million at 2019-end.

In 2020, net cash provided by operating activities came in at $89.1 million compared with $129.9 million a year ago.

2020 Highlights

Net sales in 2020 came in at $1,032.6 million compared with $898.2 million in 2019.

Income from continuing operations in 2020 came in at $89.8 million compared with $75.5 million in 2019.

In 2020, adjusted earnings per share (EPS) came in at $2.73 compared with $2.31 in the previous year.

2021 Guidance

Gibraltar expects consolidated revenues in the range of $1.3-$1.35 billion. The consensus estimate for 2021 revenues is currently pegged at $1.4 billion. The company expects EPS within $3.30-$3.47 compared with the consensus mark of $3.80.

Adjusted operating income is expected in the range of $149-$157 million. Adjusted operating margin is expected in the range of 11.5-11.7%.

Zacks Rank

Gibraltar, which shares space with Installed Building Products, Inc. (IBP - Free Report) in the same industry, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Armstrong World Industries, Inc. (AWI - Free Report) recently reported fourth-quarter 2020 results, with earnings and revenues beating the Zacks Consensus Estimate. The company reported adjusted earnings of 77 cents per share, which beat the Zacks Consensus Estimate of 70 cents by 10%. However, the bottom line declined 30.6% from $1.11 per share reported in the year-ago quarter. Net sales of $238.7 million beat the consensus mark of $231.5 million by 3.1%. However, the top line fell 3.3% year over year mainly due to lower volumes in the Mineral Fiber and the Architectural Specialties segments due to COVID-19-hit market demand.

Owens Corning (OC - Free Report) reported fourth-quarter 2020 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The company reported adjusted earnings of $1.90 per share, surpassing the Zacks Consensus Estimate of $1.13 by 36.7%. Moreover, the bottom line increased 68.1% year over year. Meanwhile, net sales of $1.93 billion outpaced the consensus mark of $1.81 billion by 6.6% and rose 14% year over year. The upside was driven by robust revenue growth in Roofing and Composites businesses, partially overshadowed by soft sales growth in the Insulation business.

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