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Gibraltar Industries (ROCK) Down 7.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Gibraltar Industries (ROCK - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Gibraltar Industries due for a breakout? 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 drivers.

Gibraltar (ROCK - Free Report) Q1 Earnings Lag Estimates, Rise Y/Y

Gibraltar Industries, Inc. reported first-quarter 2021 results, with earnings missing the Zacks Consensus Estimate and revenues surpassing the same. Nonetheless, the top and the bottom line increased on a year-over-year basis. Furthermore, management continues to be optimistic about long-term growth potential. President and chief executive officer of Gibraltar, Bill Bosway, stated, “Our first quarter results reflect solid execution and participation gains across our markets while continuing to operate through the pandemic as well as challenging weather across the country and supply chain and labor availability dynamics.”

Inside the Headlines

In the first quarter, Gibraltar reported adjusted earnings of 53 cents per share, missing the Zacks Consensus Estimate of 61 cents by 13.1% mainly due to lower contribution from the Infrastructure and Agtech segments. However, the bottom line increased 32.5% year over year, supported by growth in the Renewables, Residential, and Infrastructure segments, the TerraSmart acquisition, favorable product and services mix, proper price-cost management, and 80/20 productivity initiatives.

Quarterly net sales of $287.6 million surpassed the consensus mark of $284.2 million. However, the top line increased 33.5% year over year owing to 10% organic growth driven by its Residential Products and Renewable Energy & Conservation segments. Acquisitions contributed 23.5% to the top line.

The company’s backlog was approximately $355 million (at quarter-end), driven by robust end-market demand in Residential Products and Renewable Energy segments.

Segmental Details

Residential Products: Net sales in the segment increased 35.6% from the year-ago quarter’s period to $140.2 million for the quarter. The upside was primarily caused by strong organic growth and participation gains across residential businesses despite the impact of challenging weather conditions in February and supply chain dynamics related to material availability and logistics.

Adjusted operating margins improved 290 basis points (bps) year over year to 16.4%. Notably, strong execution and 80/20 simplification initiatives aided margins during the first quarter.

Infrastructure Products: Sales in the segment declined 2.6% year over year to $15.1 million. The downside was primarily caused by pandemic-induced delays in existing and new project schedules.

Nonetheless, adjusted operating margins expanded 330 bps to 13.5%, backed by ongoing investment in operating systems and technology, 80/20 productivity efforts and solid execution in fabricated product sales. However, this was partially offset by a decline in higher margin non-fabricated product lines. Segment backlog grew 15% sequentially to $52 million, reflecting positive momentum in the economy.

Renewable Energy: Quarterly net sales in the segment increased 80.8% year over year to $85.5 million. Notably, the upside can be primarily attributed to growth in Renewable Energy and the acquisitions of TerraSmart and Sunfig businesses. Also, 2.1% organic growth in the legacy business added to the positives. However, these positives were partly offset by projects impacted by the pandemic-related scheduling delays, inclement weather conditions and supply chain disruptions. Also, a decline in safe-harbor related demand due to the extension of the investment tax credit in late 2020 added to the woes.

Meanwhile, segment backlog rose 138% year over year owing to strong demand at both legacy and TerraSmart businesses. However, adjusted operating margins of 7.4% in the segment indicated a decline of 190 basis points (bps) during the first quarter.

Agtech: Sales in the segment declined 5.1% year over year to $46.7 million primarily because of higher infection rates, challenging weather conditions and supply chain-related challenges. Segment backlog grew 5% sequentially to $96 million, mainly driven by an active produce market.

Also, adjusted operating margins contracted 240 bps year over year to 2.4%. This was primarily impacted by the overall mix and timing of the projects along with lower volumes in the processing equipment business.

Costs & Margins

During the first quarter, selling, general and administrative expenses increased 27.3% year over year to $47.2 million. As a percentage of sales, the metric contracted 80 bps year over year to 16.4%. Meanwhile, adjusted operating margin remained flat year over year at 7.7%.

Balance Sheet & Cash Flow

As of Mar 31, 2021, Gibraltar had cash and cash equivalents worth $20.7 million compared with $32.1 million at 2020-end.
During first-quarter 2021, net cash used in operating activities came in at $3.2 million compared with $43 million a year ago.

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 $1.32 billion. The company expects EPS within $3.30-$3.47 compared with the consensus mark of $3.41.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Gibraltar Industries has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Gibraltar Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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