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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.

TopBuild Corp. Price, Consensus and EPS Surprise

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.

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