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Beacon Roofing (BECN) Up 10.8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Beacon Roofing Supply (BECN - Free Report) . Shares have added about 10.8% 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 Roofing Supply, Inc. posted impressive first-quarter fiscal 2021 results. The bottom line surpassed the Zacks Consensus Estimate, mainly backed by solid residential backdrop, stronger gross margins and reduced operating expenses.
Julian Francis, Beacon’s president and chief executive officer, said, “First quarter results represent an impressive example of the underlying potential of our company.”
Quarter in Detail
This largest distributor of residential and non-residential roofing materials reported adjusted earnings of 92 cents per share, which topped the consensus mark of 64 cents by 43.8%. In the year-ago period, it recorded earnings of 32 cents a share. Aggressive cost-cutting actions aided the bottom line. Solid residential backdrop and gross margins backed by pricing execution, mix and timing bode well.
Net sales of $1,576.5 million missed the consensus mark of $1,751 million by 9.9% but grew 11.4% year over year, given strong residential roofing, growth of complementary products as well as benefits from recent price increases, partially offset by softer demand from non-residential categories.
Sales of residential roofing products (accounting for 53.6% of net sales) grew 21.2% and complementary products (21.1%) rose 8.8%, while non-residential roofing products (25.3%) declined 3.3%.
Operating Highlights
Gross margin of 25.4% improved 140 basis points (bps) year over year for the quarter. Successful implementation of price increase, timing benefits related to the same and corresponding increase in the cost of goods sold helped drive margin. Cost-saving efforts and productivity initiatives helped the company bring down operating expenses, thereby driving its margins.
As a percentage of net sales, SG&A expenses contracted to 16.8% or 250 bps. Adjusted EBITDA grew 85.8% and adjusted EBITDA margin also expanded 370 bps year, reflecting strong demand and implementation of cost-control strategies.
Cash Position
At the end of first-quarter 2021, Beacon had cash and cash equivalents of $461.4 million, down from $624.6 million at fiscal 2020-end. Long-term debt — net of current portion — was $2.5 billion, in line with the fiscal 2020-end figure.
Cash used in operating activities was $39.1 million for the fiscal first quarter versus $125.3 million a year ago.
Fiscal Q2 Guidance
For the fiscal second quarter (ending in March), the company expects total sales growth in the mid to high-single digits despite one lesser selling day than second-quarter fiscal 2020.
Owing to seasonality, the company saw a drop in margins during the fiscal second quarter. Nonetheless, the company is confident that the impact is going to be lower than in recent years. Beacon also anticipates a year-over-year increase of nearly 200 bps in gross margin.
Fiscal 2021 Guidance
For fiscal 2021, the company expects sales from continuing operations to grow in the high single digit. Adjusted EBITDA is projected in the range of $500-$525 million for continuing operations, which reflects a significant increase from $399-million pro forma adjusted EBITDA for fiscal 2020. This improvement reflects strong sales growth, gross margin gains and favorable operating leverage.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 111.54% due to these changes.
VGM Scores
At this time, Beacon Roofing has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending upward 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.
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Beacon Roofing (BECN) Up 10.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Beacon Roofing Supply (BECN - Free Report) . Shares have added about 10.8% 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 (BECN - Free Report) Q1 Earnings Top Estimates, Rise Y/Y
Beacon Roofing Supply, Inc. posted impressive first-quarter fiscal 2021 results. The bottom line surpassed the Zacks Consensus Estimate, mainly backed by solid residential backdrop, stronger gross margins and reduced operating expenses.
Julian Francis, Beacon’s president and chief executive officer, said, “First quarter results represent an impressive example of the underlying potential of our company.”
Quarter in Detail
This largest distributor of residential and non-residential roofing materials reported adjusted earnings of 92 cents per share, which topped the consensus mark of 64 cents by 43.8%. In the year-ago period, it recorded earnings of 32 cents a share. Aggressive cost-cutting actions aided the bottom line. Solid residential backdrop and gross margins backed by pricing execution, mix and timing bode well.
Net sales of $1,576.5 million missed the consensus mark of $1,751 million by 9.9% but grew 11.4% year over year, given strong residential roofing, growth of complementary products as well as benefits from recent price increases, partially offset by softer demand from non-residential categories.
Sales of residential roofing products (accounting for 53.6% of net sales) grew 21.2% and complementary products (21.1%) rose 8.8%, while non-residential roofing products (25.3%) declined 3.3%.
Operating Highlights
Gross margin of 25.4% improved 140 basis points (bps) year over year for the quarter. Successful implementation of price increase, timing benefits related to the same and corresponding increase in the cost of goods sold helped drive margin. Cost-saving efforts and productivity initiatives helped the company bring down operating expenses, thereby driving its margins.
As a percentage of net sales, SG&A expenses contracted to 16.8% or 250 bps. Adjusted EBITDA grew 85.8% and adjusted EBITDA margin also expanded 370 bps year, reflecting strong demand and implementation of cost-control strategies.
Cash Position
At the end of first-quarter 2021, Beacon had cash and cash equivalents of $461.4 million, down from $624.6 million at fiscal 2020-end. Long-term debt — net of current portion — was $2.5 billion, in line with the fiscal 2020-end figure.
Cash used in operating activities was $39.1 million for the fiscal first quarter versus $125.3 million a year ago.
Fiscal Q2 Guidance
For the fiscal second quarter (ending in March), the company expects total sales growth in the mid to high-single digits despite one lesser selling day than second-quarter fiscal 2020.
Owing to seasonality, the company saw a drop in margins during the fiscal second quarter. Nonetheless, the company is confident that the impact is going to be lower than in recent years. Beacon also anticipates a year-over-year increase of nearly 200 bps in gross margin.
Fiscal 2021 Guidance
For fiscal 2021, the company expects sales from continuing operations to grow in the high single digit. Adjusted EBITDA is projected in the range of $500-$525 million for continuing operations, which reflects a significant increase from $399-million pro forma adjusted EBITDA for fiscal 2020. This improvement reflects strong sales growth, gross margin gains and favorable operating leverage.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 111.54% due to these changes.
VGM Scores
At this time, Beacon Roofing has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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.
Outlook
Estimates have been broadly trending upward 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.