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Gibraltar (ROCK) Stock Down on Q3 Earnings Miss, View Tepid

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Gibraltar Industries, Inc. (ROCK - Free Report) reported lackluster results for third-quarter 2021. Earnings and revenues missed the Zacks Consensus Estimate. Despite year-over-year growth in the top line, the bottom line fell due to intense inflationary pressure and supply-related woes.

Following the results, the stock fell 10.6% on Oct 27 as the company reduced its full-year adjusted earnings guidance and provided a tepid fourth-quarter view.

President and CEO of Gibraltar, Bill Bosway, stated, “We remain confident that margins will begin to improve once inflation moderates and expand further as supply chain disruptions become less impactful. Given strong fundamental demand drivers in our end markets, we expect today’s environment to have minimal impact on the long-term outlook for our portfolio businesses.”

Inside the Headlines

Gibraltar reported adjusted earnings of 91 cents per share, missing the Zacks Consensus Estimate of $1.23 by 26% and decreasing 7.1% year over year. The downside was owing to steepened materials and transportation inflation as well as heightened supply chain issues.

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

Quarterly net sales of $369.4 million lagged the consensus mark of $377 million by 2%. The top line increased 24.5% year over year owing to 3.9% organic growth driven by pricing, end-market demand in Renewables and Infrastructure, and participation gains primarily in Residential. Acquisitions contributed 20.6% to the top line.

The company’s order backlog was $385 million (at quarter-end), up 10% year over year driven by robust end-market demand in the Renewable Energy segment.

Segmental Details

Renewable Energy: Net sales in the segment increased 85.5% from the year-ago period to $130.2 million for the third quarter. The upside was primarily driven by solid contributions from both legacy and TerraSmart businesses. Owing to strong customer bookings across all product lines (up 30.4%), backlog increased to a record $184 million, up 80% from the last year.

Adjusted operating margins contracted 150 basis points (bps) year over year to 11.4%. Margins were impacted by inefficient project management and field operations due to supply chain disruptions for solar panels as well as other key components.

Residential Products: Quarterly net sales in the segment increased 13.1% year over year to $171.5 million. The upside can be primarily attributed to 17.2% organic growth and 4.4% from the Architectural Mailboxes buyout. Also, additional price actions, recent weather-related repair demand and participation gains supported the growth.

Yet, adjusted operating margins of 17.2% reflected a decline of 430 bps for the quarter.

Agtech: Sales in the segment reduced 15.5% year over year to $49 million, primarily because of delays in produce project schedules due to imported glass for roofing systems, and project delays related to state licensing as well as permit approvals in the cannabis businesses. Backlogs were up 22% in the year-to-date period and new orders increased 44% sequentially. The pipeline of expected new orders in all three businesses — Produce, Cannabis, and Commercial — remains strong. The trend is expected to continue in the fourth quarter and 2022.

Adjusted operating margins contracted 500 bps year over year to 5.1%, primarily impacted by lower sequential sales, and greater inflation as well as supply chain disruptions.

Infrastructure: Sales in the segment grew 11.3% year over year to $18.7 million. The upside was primarily driven by strong demand for both fabricated and non-fabricated products as well as improving State D.O.T. and project funding on overall economic recovery.

Adjusted operating margins declined 480 bps to 8.8% owing to product line mix, rubber supply issues, production inefficiencies related to production capacity expansion and price/cost alignment.

Costs & Margins

For the third quarter, selling, general and administrative expenses increased 20.6% year over year to $45.3 million. As a percentage of sales, the metric improved 40 bps year over year to 12.3%. Meanwhile, adjusted operating margin contracted 310 bps year over year to 11.1%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, Gibraltar had cash and cash equivalents worth $13.9 million compared with $32.1 million at 2020-end.

For the first nine months of 2021, net cash used in operating activities totaled $16.5 million against $56.2 million cash provided by operating activities in the corresponding year-ago period.

2021 Guidance Updated

Based on the ongoing business dynamics, Gibraltar has raised the lower limit of the previous guidance for revenues to $1.31-$1.35 billion, signaling year-over-year growth of 27-31%. The consensus estimate for 2021 revenues is currently pegged at $1.34 billion. Yet, it has reduced its adjusted earnings guidance to $2.95-$3.06 per share from the prior projection of $3.30-$3.47, indicating an 8-12% year-over-year rise. The consensus mark for the same is pegged at $3.41 per share. The reduced earnings guidance is mainly driven by the current cost environment, supply chain disruptions, and incremental costs along with potential labor and productivity impacts associated with future COVID mandates.

For the fourth quarter, adjusted earnings are likely to be within 71-82 cents per share, with a year-over-year growth rate of 21-39%. The consensus mark for the same is pegged at 85 cents per share.

Zacks Rank & Peer Releases

Gibraltar 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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