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TopBuild (BLD) Q3 Earnings & Revenues Lag, Rise Y/Y, View Up

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TopBuild Corp.’s (BLD - Free Report) shares dropped 1.95% during the trading session on Nov 2, after its third-quarter 2021 earnings release. Its earnings and revenues missed the respective Zacks Consensus Estimate due to unprecedented supply-chain disruptions and labor shortages prevailing in the construction sector.

Both the top and the bottom line grew impressively from the prior-year quarter. The uptrend was backed by increased sales volume and a solid contribution from acquisitions, and pricing at both businesses, defying the labor and material-constrained market. The company lifted its 2021 guidance for sales and adjusted EBITDA.

Robert Buck, president & CEO, of TopBuild said, “Looking ahead, we are confident in the overall fundamentals of our three end-markets; residential, commercial and industrial, and our ability to leverage our size, scale, and operational excellence to continue to drive profitable growth.”

Inside the Headlines

The company reported adjusted earnings of $2.95 per share, which missed the consensus estimate of $3.05 by 3.3% but grew 40.5% from the prior-year period.

Total net sales of $845.8 million missed the consensus mark of $888 million by 4.7% but improved 21.3% (10.6% on a same-branch basis) year over year. The growth was backed by acquisitions and prices. Sales for the quarter benefited from strong growth in both residential and commercial businesses.

TopBuild Corp. Price, Consensus and EPS Surprise

TopBuild Corp. Price, Consensus and EPS Surprise

TopBuild Corp. price-consensus-eps-surprise-chart | TopBuild Corp. Quote

Segmental Performance

Installation (TruTeam) sales increased 24.5% year over year to $612.9 million. Acquisitions, volume and selling price added 14.3%, 1.9% and 8.4% to sales, respectively.  Adjusted operating margin for the quarter expanded 20 basis points (bps) to 17.2%.

Revenues of the Distribution (Service Partners) segment grew 13.2% year over year to $276.4 million, driven by 16.5% growth in price and 1.9% acquisitions. Volumes, however, negatively impacted the topline by 5.2%. Adjusted operating margin improved by 370 bps from the year-ago level to 17.1%.

Operating Highlights

Adjusted gross margin of 29.6% expanded to 110 bps. Adjusted operating margin expanded to 170 bps from the year-ago period to 16.3%.

Adjusted EBITDA grew 32.8% from the year-ago quarter to $119.2 million. Adjusted EBITDA margin also improved by 160 bps to 18.7% for the quarter.

Financial Update

At September-end, cash and cash equivalents were $327.9 million, down from $261.7 million at the second-quarter end. The company has $381.9 million available-borrowing capacity under the revolving facility.

At quarter-end, the long-term debt was $675.6 million, down from $683.4 million at 2020-end. For the first nine months of 2021, net cash provided by operating activities was $309.5 million compared with $255.7 million in the comparable year-ago period.

In the third quarter, the company repurchased 60,105 shares for $191.64 per share.

2021 View Raised

For 2021, TopBuild expects sales between $3.425 billion and $3.475 billion versus $3.290-$3.370 billion expected earlier. The estimated figure depicts an increase from $2.72 billion in 2020. Adjusted EBITDA is projected within $585-$605 million versus the earlier projection of $565-$590 million, suggesting growth from $436.7 million reported a year ago.

Zacks Rank

TopBuild currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Construction Stocks to Bet on

Other top-ranked stocks in the Zacks Construction sector include Tri Pointe Homes Inc. (TPH - Free Report) , Jacobs Engineering Group Inc. (J - Free Report) and Toll Brothers Inc. (TOL - Free Report) . While Tri Pointe sports a Zacks Rank #1, the other two stocks carry a Zacks Rank #2 (Buy).

Earnings for Tri Pointe, Jacobs and Toll Brothers are expected to grow 80.2%, 13.9% and 80%, respectively, for the current year.

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