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TopBuild (BLD) Stock Down Despite Q1 Earnings & Revenue Beat
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TopBuild Corp. (BLD - Free Report) reported impressive results for first-quarter 2021. Its earnings and revenues not only surpassed the Zacks Consensus Estimate but also grew impressively from the prior-year quarter. The uptrend was backed by increased sales volume, solid contributions from acquisitions and price.
However, its shares slipped 3.1% on May 6, following the earnings release. Despite encouraging 2021 guidance for sales, adjusted EBITDA and housing starts, investors might be pessimistic about the company’s future earnings performance owing to material cost inflation and labor constraints.
Robert Buck, president & CEO, of TopBuild, said “Our team is executing well and remains focused on profitable growth, which includes successfully managing the multiple material cost increases announced this year, leveraging our fixed cost base and continuing to focus on operational efficiency.”
During the reported period, the company acquired LCR Contractors and Ozark Foam. Also, it added ABS and Creative Conservation to its portfolio in April. These four acquisitions are expected to generate approximately $217.1 million of annual revenues.
Inside the Headlines
The company reported adjusted earnings of $2.02 per share, which surpassed the consensus estimate of $1.93 by 4.7% and grew 47.4% from the prior-year period.
Total net sales of $742.8 million topped the consensus mark of $736 million by 0.9% and improved 13.7% on a year-over-year basis. The growth was backed by higher volume, acquisitions and price. Sales for the quarter benefited from strong growth in both residential and commercial businesses.
Segmental Performance
Installation (TruTeam) revenues increased 12% year over year to $532.8 million. Acquisitions, volume and selling price added 5.8%, 5.1% and 1.1% to revenues, respectively. Adjusted operating margin for the quarter expanded 120 basis points (bps) to 13.9%.
Revenues of the Distribution (Service Partners) segment grew 17.4% year over year to $251.6 million, driven by 13.8% volume and 3.7% selling price growth. Adjusted operating margin improved 260 bps from the year-ago level to 14.1%.
Operating Highlights
Adjusted gross margin of 26.7% expanded 40 bps. Adjusted operating profit of $97.2 million also increased 38.3% year over year. Adjusted operating margin expanded 230 bps from the year-ago period to 13.1%.
Adjusted EBITDA grew 31.1% from the year-ago quarter to $115.8 million. Adjusted EBITDA margin also improved 210 bps to 15.6% for the quarter. Incremental adjusted EBITDA margin was 30.6% (39.9% on a same branch basis).
Financial Update
At March-end, cash and cash equivalents were $319.6 million, up from $330 million at 2020-end. The company has $389.6 million available borrowing capacity under the revolving facility.
At quarter-end, long-term debt was $686.5 million, slightly up from $683.4 million at 2020-end. In the first three months of 2021, net cash provided by operating activities was $89.4 million compared with $72.9 million in the comparable year-ago period.
In the first quarter, it repurchased 49,284 shares for $199.98 per share. At March-end, $30.1 million was remaining under the $200-million stock repurchase authorization.
2021 View
For 2021, it expects sales between $3,220 million and $3,320 million (indicating a significant increase from $2.72 billion in 2020). Adjusted EBITDA is projected within $532-$562 million, suggesting growth from $436.7 million reported a year ago.
It anticipates housing starts in the range of 1,450-1,500 units.
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TopBuild (BLD) Stock Down Despite Q1 Earnings & Revenue Beat
TopBuild Corp. (BLD - Free Report) reported impressive results for first-quarter 2021. Its earnings and revenues not only surpassed the Zacks Consensus Estimate but also grew impressively from the prior-year quarter. The uptrend was backed by increased sales volume, solid contributions from acquisitions and price.
However, its shares slipped 3.1% on May 6, following the earnings release. Despite encouraging 2021 guidance for sales, adjusted EBITDA and housing starts, investors might be pessimistic about the company’s future earnings performance owing to material cost inflation and labor constraints.
Robert Buck, president & CEO, of TopBuild, said “Our team is executing well and remains focused on profitable growth, which includes successfully managing the multiple material cost increases announced this year, leveraging our fixed cost base and continuing to focus on operational efficiency.”
During the reported period, the company acquired LCR Contractors and Ozark Foam. Also, it added ABS and Creative Conservation to its portfolio in April. These four acquisitions are expected to generate approximately $217.1 million of annual revenues.
Inside the Headlines
The company reported adjusted earnings of $2.02 per share, which surpassed the consensus estimate of $1.93 by 4.7% and grew 47.4% from the prior-year period.
TopBuild Corp. Price, Consensus and EPS Surprise
TopBuild Corp. price-consensus-eps-surprise-chart | TopBuild Corp. Quote
Total net sales of $742.8 million topped the consensus mark of $736 million by 0.9% and improved 13.7% on a year-over-year basis. The growth was backed by higher volume, acquisitions and price. Sales for the quarter benefited from strong growth in both residential and commercial businesses.
Segmental Performance
Installation (TruTeam) revenues increased 12% year over year to $532.8 million. Acquisitions, volume and selling price added 5.8%, 5.1% and 1.1% to revenues, respectively. Adjusted operating margin for the quarter expanded 120 basis points (bps) to 13.9%.
Revenues of the Distribution (Service Partners) segment grew 17.4% year over year to $251.6 million, driven by 13.8% volume and 3.7% selling price growth. Adjusted operating margin improved 260 bps from the year-ago level to 14.1%.
Operating Highlights
Adjusted gross margin of 26.7% expanded 40 bps. Adjusted operating profit of $97.2 million also increased 38.3% year over year. Adjusted operating margin expanded 230 bps from the year-ago period to 13.1%.
Adjusted EBITDA grew 31.1% from the year-ago quarter to $115.8 million. Adjusted EBITDA margin also improved 210 bps to 15.6% for the quarter. Incremental adjusted EBITDA margin was 30.6% (39.9% on a same branch basis).
Financial Update
At March-end, cash and cash equivalents were $319.6 million, up from $330 million at 2020-end. The company has $389.6 million available borrowing capacity under the revolving facility.
At quarter-end, long-term debt was $686.5 million, slightly up from $683.4 million at 2020-end. In the first three months of 2021, net cash provided by operating activities was $89.4 million compared with $72.9 million in the comparable year-ago period.
In the first quarter, it repurchased 49,284 shares for $199.98 per share. At March-end, $30.1 million was remaining under the $200-million stock repurchase authorization.
2021 View
For 2021, it expects sales between $3,220 million and $3,320 million (indicating a significant increase from $2.72 billion in 2020). Adjusted EBITDA is projected within $532-$562 million, suggesting growth from $436.7 million reported a year ago.
It anticipates housing starts in the range of 1,450-1,500 units.
Zacks Rank
TopBuild — which share space with United Rentals, Inc. (URI - Free Report) , Armstrong World Industries, Inc. (AWI - Free Report) and Masco Corporation (MAS - Free Report) in the Zacks Building Products - Miscellaneous industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>