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Beacon (BECN) Q3 Earnings Beat, Sales Miss, Margins High

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Beacon Roofing Supply, Inc. (BECN - Free Report) plunged 4.8% in the after-hours trading session on Nov 18, after it reported fourth-quarter fiscal 2021 results. The bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis. The solid quarterly results were mainly backed by record net sales, gross margin expansion and operational improvement.

Julian Francis, Beacon’s president and CEO said, “In fiscal 2021, we demonstrated the strength of our platform by generating record top line and bottom line results, building a solid foundation for our future ambitions. Focused market and price execution also drove the highest fourth quarter sales and Adjusted EBITDA in our history. Our team continued to deliver high-value solutions to our customers’ critical building material needs in a supply-challenged environment. Furthermore, the progress on our strategic initiatives and operational improvements has been transformational throughout fiscal 2021.”

Quarter in Detail

Beacon’s adjusted earnings of $1.53 per share topped the consensus mark of $1.50 by 2% and grew 17.7% from the year-ago period on higher revenues, margin expansion and aggressive cost-cutting actions.

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Beacon Roofing Supply, Inc. price-consensus-eps-surprise-chart | Beacon Roofing Supply, Inc. Quote

Net sales of $1.88 billion, however, missed the consensus mark of $1.90 billion by 1%. Nonetheless, the metric gained 6.9% year over year. Sales increased across all three product categories, largely driven by realization of price increases.

Sales of residential roofing products (accounting for 53% of net sales), non-residential roofing products (25.3%), and complementary products (21.7%) increased 3.1%, 7%, and 17%, respectively.

Operating Highlights

Gross margin of 27.1% improved 200 basis points (bps) year over year, courtesy of successful implementation of price increase, partially offset by an unfavorable sales mix. Adjusted operating margin increased 50 bps for the quarter, mainly due to higher incentive compensation and selling costs. Adjusted EBITDA margin expanded 150 bps year over year.

Cash Position

At fiscal fourth quarter-end, Beacon had cash and cash equivalents of $260 million, significantly down from $624.6 million at fiscal 2020-end. Net long-term debt was $1.61 billion, lower than the fiscal 2020-end figure of $2.49 billion.

Cash provided by operating activities was $78 million for fiscal 2021 compared with $479.3 million in fiscal 2020.

Fiscal 2021 Highlights

Net sales were up 12.3% year over year to $6.64 billion. Residential roofing product sales grew 14.2%, non-residential roofing product sales rose 4.5% and complementary product sales increased 17.7% from the prior year. Gross margin advanced 250 bps from a year ago to 26.5%. The company reported an adjusted net income of $360.1 million, up from $145.8 million in fiscal 2020.

Recent Acquisition

On Nov 1, 2021, the company acquired Midway Sales & Distributing, Inc., a leading Midwest distributor of residential and commercial exterior building and roofing supplies. The acquisition will deepen Beacon’s presence in the Midwest.

Zacks Rank & Peer Release

Beacon Roofing currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fastenal Company (FAST - Free Report) — which currently carries a Zacks Rank #2 — reported impressive third-quarter 2021 results.

Fastenal’s top and bottom lines not only beat the respective Zacks Consensus Estimate but also improved on a year-over-year basis.

Builders FirstSource (BLDR - Free Report) — which currently carries a Zacks Rank #1 — reported solid results for third-quarter 2021, wherein earnings and net sales surpassed the Zacks Consensus Estimate as well as increased significantly on a year-over-year basis.

Builders FirstSource’s results were driven by an increase in net sales and gross margin, partially offset by higher tax and selling, general & administrative expenses.

The Home Depot, Inc. (HD - Free Report) — which currently carries a Zacks Rank #1 — posted third-quarter fiscal 2021 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year.

Home Depot gained from continued strong demand for home-improvement projects, robust housing market trends and ongoing investments.