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Why Is TopBuild (BLD) Up 4.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for TopBuild (BLD - Free Report) . Shares have added about 4.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TopBuild due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

TopBuild (BLD - Free Report) Q4 Earnings & Sales Top, 2022 View Solid

TopBuild Corp.’s fourth-quarter 2021 earnings and revenues surpassed their respective Zacks Consensus Estimate and improved year over year, thanks to favorable volume and acquisitions, and pricing at both businesses, defying the labor and material-constrained market.

Robert Buck, the president & CEO of TopBuild, said, “The integration of DI, while in the early stages, is proceeding ahead of expectations and we are even more confident we will achieve the $35 million to $40 million of synergies forecasted when we first announced this transaction.”

He added, “Looking at 2022, we expect demand to remain solid in all three of the end-markets we serve: residential, commercial and industrial. Our focus throughout all areas of our business remains unchanged: driving top line growth, continuing the successful integration of DI, and improving operational efficiencies.”

Inside the Headlines

The company reported adjusted earnings of $3.12 per share, which topped the consensus estimate of $2.99 by 4.4% and grew 45.1% from the prior-year period.

Total net sales of $1.06 billion beat the consensus mark of $1.03 billion by 3.6% and improved 47.4% (12.5% 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.

Segmental Performance

Installation (TruTeam) sales increased 23.3% year over year to $627.1 million. Acquisitions, volume and selling price added 11.1%, 1.2% and 11% to sales, respectively. Adjusted operating margin for the quarter expanded 90 bps to 17%. Adjusted EBITDA margin also improved 80 bps to 19.4% for the quarter.

Revenues of the Specialty Distribution (Service Partners) segment grew 93.1% year over year to $485.8 million, driven by 22.4% growth in price and 77.4% from acquisitions. Volumes, however, negatively impacted the top line by 6.8%. Adjusted operating margin declined 100 bps from the year-ago level to 12.4%. Nonetheless, adjusted EBITDA margin improved 70 bps to 15% for the quarter.

Operating Highlights

Adjusted gross margin of 28.1% expanded to 60 bps. Yet, adjusted operating margin contracted 20 bps from the year-ago period to 14.2%. SG&A expenses, as a percentage of revenues, rose 80 bps to 13.9%.

Adjusted EBITDA grew 49.9% from the year-ago quarter to $182.1 million. Adjusted EBITDA margin also improved 30 bps to 17.1% for the quarter.

Financial Update

At 2021-end, cash and cash equivalents were $139.8 million, down from $330 million at 2020-end. Long-term debt was $1.45 billion, up from $683.4 million at 2020-end. For 2021, net cash provided by operating activities was $403 million compared with $357.9 million in 2020.

In 2021, BLD repurchased 183,136 shares for approximately $35.6 million.

2021 Highlights

Adjusted earnings of $10.85 per share grew 49% year over year. Net sales advanced 28.3% from a year ago to $3.49 billion. Adjusted operating margin expanded 160 bps to 14.8%. Adjusted EBITDA margin improved 130 bps to 17.4%. Despite several industry-related challenges, both of its business segments reported revenue growth and solid margin expansion.

2022 View

For 2022, TopBuild expects sales between $4.5 billion and $4.65 billion. The estimated figure indicates an increase of 29-33% year over year. Adjusted EBITDA is projected within $770-$820 million, suggesting growth from $605.9 million reported in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 5.18% due to these changes.

VGM Scores

Currently, TopBuild has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, TopBuild has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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