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PGT Innovations (PGTI) Q2 Earnings Miss, Margins Decline Y/Y

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PGT Innovations, Inc.’s (PGTI - Free Report) shares fell 5.9% on Aug 12, following the second-quarter fiscal 2021 (ended Jul 3, 2021) earnings release. The company’s earnings not only lagged the Zacks Consensus Estimate but also declined year over year due to higher material, labor and selling costs. Also, increased amortization expense related to recent acquisitions added to the woes.

Nonetheless, net sales slightly topped the consensus mark and increased from the prior-year period, given strong economic growth across key markets.

Jeff Jackson, president and chief executive officer of PGT Innovations, said, "Looking toward the second half of the year, we expect that price increases and the benefits from increased efficiencies will enable us to improve margins in both the third and fourth quarters.”

Inside the Headline Numbers

The company reported adjusted earnings of 18 cents per share, missing the consensus mark of 31 cents by 41.9% and decreasing 14.3% year over year.

Its net sales of $285.5 million, however, grew 41% year over year and surpassed analysts’ expectation by 1.3%. This was driven by strong organic growth of 29% and 8.4% contribution from Eco. The Southeast business unit’s sales were up 40% and the Western business unit’s sales grew 44%, backed by continued recovery in Arizona as well as California.

PGT, Inc. Price, Consensus and EPS Surprise

PGT, Inc. Price, Consensus and EPS Surprise

PGT, Inc. price-consensus-eps-surprise-chart | PGT, Inc. Quote

Annualized unit order entry rose 35% from the prior-year period as demand continues to be robust across geographies and business channels.

Margins

The company’s gross margin was 34% for the quarter, reflecting a 270 basis-point (bps) decline year over year. The downside was due to low benefits received from increased prices, as backlog was generated prior to the price increases.

Adjusted EBITDA improved 3.2% from the prior-year quarter to $35.8 million but margin contracted a whopping 460 bps. Adjusted EBITDA margin was 12.5%, significantly down from the year-ago figure of 17.1%

Balance Sheet

As of Jul 3, PGT Innovations had cash and cash equivalents of $47.6 million compared with $100.3 million at 2020-end. Long-term debt, less current portion, was $474.5 million compared with $412.1 million at 2020-end.

2021 Guidance Revised

Backed by an increase in prices and shipments in the back half of 2021, the company now expects net sales within $1.1-$1.2 billion versus $1.050-$1.125 billion expected earlier. This reflects year-over-year growth of 25-36% compared with 19-27% of prior projection.

EBITDA for the year is now likely to be within $160-$190 million or witness 7-27% year-over-year growth versus $175-$194 million or 17-29% rise anticipated earlier. The decline in bottom-line projection reflects costs associated with an increase in capacity to meet higher demand and supply chain challenges.

Zacks Rank

PGT Innovations — which shares space with Arcosa, Inc. (ACA - Free Report) , Armstrong World Industries, Inc. (AWI - Free Report) and Construction Partners, Inc. (ROAD - 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.