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Gibraltar (ROCK) Misses Q2 Earnings Estimates, Stock Down

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Gibraltar Industries, Inc. (ROCK - Free Report) reported mixed second-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. Following the results, shares of the company fell 2.8% during trading hours on Aug 3.

President and CEO of Gibraltar, Bill Bosway, stated, “We expect today’s business environment, which has been very dynamic since the beginning of January, to remain so throughout the second half of 2021. We will continue to manage inflation, minimize supply chain disruptions, operate in a tight labor market, and continue with our COVID operating protocols. We are currently positioned well with solid end market demand, record order backlog, a very healthy balance sheet, and strong focus on daily execution, acquisition integrations, and further strengthening our organization and operating systems.“

Inside the Headlines

In the second quarter, Gibraltar reported adjusted earnings of 80 cents per share, missing the Zacks Consensus Estimate of 90 cents by 11.1%. However, the bottom line increased 6.7% year over year supported by significant growth in all business segments, the TerraSmart acquisition and 80/20 productivity initiatives. The upside was partially offset by timing and alignment of higher input costs and price increases, supply chain disruptions, and shifts in project timing at the Agtech and Renewables segments.

Quarterly net sales of $348.4 million surpassed the consensus mark of $328.4 million by 6.1%. Also, the top line increased 36.5% year over year owing to 14% organic growth that was driven by strong end-market demand, participation gains, and pricing of all four segments, particularly in Renewables, Residential and AgTech segments. Acquisitions contributed 22.5% to the top line.

The company’s order backlog was more than $400 million (at quarter-end), up 54% year over year driven by robust end-market demand in the Renewable Energy segment.

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

Segmental Details

Residential Products: Net sales in the segment increased 17.7% from the year-ago quarter’s period to $164.2 million in the second quarter. The upside was primarily driven by strong organic growth of 12% mainly driven by pricing and volume, and participation gains across residential businesses despite the impact of supply chain dynamics related to material, labor and logistics availability. Architectural Mailboxes acquisition also contributed 6% to the growth.

Adjusted operating margins contracted 360 basis points (bps) year over year to 16.6%. The downside was due to the effects of accelerated inflation, material and labor availability, and the timing and alignment of price actions with input costs.

Infrastructure Products: Sales in the segment grew 29.7% year over year to $22.7 million. The upside was primarily driven by increased fabricated and non-fabricated product demand.

Also, adjusted operating margins expanded 240 basis points to 18.4%, driven by mix of higher-margin non-fabricated products and solutions, strong execution on higher volumes, and continued investment in 80/20 productivity initiatives. Segment backlog grew 11% to more than $46 million, reflecting positive momentum of the business segment.

Renewable Energy: Quarterly net sales in the segment increased 92.5% year over year to $107.8 million. Notably, the upside can be primarily attributed to the acquisitions of TerraSmart. Also, 25% organic growth in the legacy business added to the positives. This robust growth is driven by strong demand for Gibraltar’s product offerings of fixed tilt, tracker, canopy, and eBos product solutions serving the community and commercial and industrial market segments.

Meanwhile, segment backlog rose 54% year over year, on a proforma basis, owing to strong demand at both legacy and TerraSmart businesses. This marked the highest backlog level in the company’s history. However, adjusted operating margins of 11.3% in the segment indicated a decline of 380 bps during the second quarter.

Agtech: Sales in the segment increased 27% year over year to $53.7 million primarily because of robust activity across the produce, commercial, car wash, retail, and processing equipment segments. Gibraltar experienced project movement from the second quarter into the second half of 2021 owing to permit delays, rescoping of projects, and supply chain disruptions due to which the segment backlog declined slightly.

Also, adjusted operating margins contracted 130 bps year over year to 4.2%. This was primarily impacted by the business mix, movement of certain projects into the second half of the year, and higher input costs and logistics challenges.

Costs & Margins

During the second quarter, selling, general and administrative expenses increased 42.3% year over year to $49.5 million. As a percentage of sales, the metric increased nearly 60 bps year over year to 14.2%. Meanwhile, adjusted operating margin contracted 260 bps year over year to 10.2%.

Balance Sheet & Cash Flow

As of Jun 30, 2021, Gibraltar had cash and cash equivalents worth $17 million compared with $32.1 million at 2020-end.

During second-quarter 2021, net cash provided by operating activities came in at $10.8 million against $7.3 million cash used in operating activities 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 adjusted EPS within $3.30-$3.47. The consensus mark for the same is pegged at $3.41.

Zacks Rank & Key Picks

Gibraltar carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Zacks Building Products - Miscellaneous industry include Owens Corning (OC - Free Report) , Otis Worldwide Corporation (OTIS - Free Report) and Masco Corporation (MAS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens Corning, Otis and Masco’s 2021 earnings are expected to rise 68.1%, 17.8% and 17.3%, respectively.

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