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Virco's (VIRC) Q2 Earnings Miss Estimates, Backlog Rises

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Virco Mfg. Corporation (VIRC - Free Report) recently reported second-quarter fiscal 2022 (ended Jul 31, 2021) results, wherein earnings and revenues missed the Zacks Consensus Estimate. The company acknowledges that the continuous impact of the coronavirus pandemic combined with labor and material shortages resulted in lower-than-expected shipments in the quarter. Following the announcement, shares of the company dropped 0.6% during the trading session on Sep 14.

However, the bottom line increased on a year-over-year basis owing to the lower effective tax rate.

Earnings & Revenue Discussion

Virco reported adjusted earnings of 24 cents per share, missing the Zacks Consensus Estimate of 30 cents per share by 20%. However, the bottom line improved from earnings of 23 cents per share reported in the year-ago quarter.

Net sales of $59 million missed the consensus mark by 18.4%. Also, the top line dropped 0.7% year over year, mainly on lower shipment volumes.

Robust Backlogs

As of Aug 31, 2021, the company’s shipments plus unshipped backlog (“Shipments + Backlog”) stood at $173.1 million versus the prior year’s figure of $135.1 million.

Moreover, as of Aug 31, 2021, the backlog came in at $59.6 million, up 157% from a year ago.

Operating Highlights

Gross margin was 37.8%, down 120 basis points (bps) from the year-ago period. The downside is primarily attributable to the higher raw material and in-bound freight costs, which were partially offset by price increases implemented at the beginning of the fiscal year.

Selling, general, administrative and other expenses (SG&A) were $16.3 million for second-quarter fiscal 2022 compared with $15.5 million in the year-ago quarter. The spike was driven by higher freight costs related to shipments to customers.

Furthermore, the company reported net income of $3.8 million, up 5.8% from the year-ago period.

Financials

As of Jul 31, 2021, Virco had cash of $0.6 million compared with $0.4 million at the end of Jan 31, 2021.

As of Jul 31, 2021, the company’s long-term debt (excluding current portion) came in at $14.7 million, significantly up from $9.6 million at Jan 31, 2021-end.

At the end of second-quarter fiscal 2022, the company’s inventory came in at $42.4 million, up from $38.3 million in the year-ago period.

Zacks Rank & Key Picks

Currently, Virco carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the Zacks Furniture industry include La-Z-Boy Incorporated (LZB - Free Report) , Sleep Number Corporation (SNBR - Free Report) and Leggett & Platt, Incorporated (LEG - Free Report) , each carrying a Zacks Rank #2 (Buy).

La-Z-Boy has a trailing four-quarter earnings surprise of 20.2%, on average.

Sleep Number has a three to five-year earnings per share growth rate of 13.3%.

Leggett’s earnings for 2021 are expected to rise 33.8%.