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Why Is Builders FirstSource (BLDR) Down 14.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have lost about 14.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Builders FirstSource due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Builders FirstSource Up on Q2 Earnings & Revenue Beat
Builders FirstSource released its second-quarter 2022 results, wherein it reported 12.2% core organic sales growth.
The company’s earnings and net sales surpassed the Zacks Consensus Estimate and increased significantly year over year. The results were driven by an increase in net sales and gross margin as well as contributions from acquisitions amid continuous raw material supply woes.
Dave Flitman, President and CEO of Builders FirstSource, said, “I remain optimistic on the prospects for our industry over the long term and confident in our ability to outperform the market as we execute our strategy and further invest in margin accretive, value-added products and transformative digital solutions. We also remain fully committed to leveraging our strong cash flow profile to strategically deploy capital toward a combination of high return internal investments, accretive bolt-on M&A and returns to shareholders.”
Peter Jackson, CFO of Builders FirstSource, added, “Looking ahead, we are exceptionally well-positioned to capture organic and inorganic value-enhancing growth opportunities and expand our market-leading positions. For 2022, we remain focused on delivering strong double-digit base business growth and significant free cash flow.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $6.26 per share, which handily topped the consensus mark of $3.00. The reported figure also increased by a significant 126.8% from the year-ago quarter.
For the quarter, net sales of $6.93 billion surpassed the consensus mark of $5.45 billion. The top line grew 24.2% on a year-over-year basis. Core organic sales grew 12.2% from the prior-year quarter. Commodity price inflation contributed 3.9% to net sales. Acquisitions added 8.1% to net sales growth. The upside was led by solid demand for its products amid supply woes.
Notably, core organic sales in value-added products increased 32% compared with the prior-year period.
Core organic customer growth in Single Family increased 15.8%, while R&R/Other and Multi Family remained almost flat year over year.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 42.2% of the quarterly net sales) were $2.92 billion, up 50.9% from the prior year.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 16.9% of the quarterly net sales) increased 12.3% from the year-ago quarter to $1.17 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 40.9% of the quarterly net sales) increased 9.1% year over year to $2.83 billion.
Operating Highlights
Gross profit for the quarter increased 52.4% year over year to $2.4 billion. Gross margin of 34.8% expanded 640 basis points (bps) year over year owing to higher sales in value-added product categories, disciplined pricing in a volatile, supply-constrained marketplace and effective and timely sourcing. As a percentage of net sales, total SG&A expenses improved 110 bps to 15.1%.
Adjusted EBITDA increased 80.3% on a year-over-year basis to $1.5 billion, primarily driven by core organic growth, commodity inflation, and acquisitions. Adjusted EBITDA margin expanded 680 bps year over year to 21.8%.
Other Financial Details
As of Jun 30, 2022, Builders FirstSource had cash and cash equivalents of $166.2 million compared with $42.6 million at 2021-end. Long-term debt — net of current portion — was $3.55 billion, up from $2.93 billion at 2021-end.
The company had liquidity of $1 billion at June 2022 end, consisting of approximately $0.8 billion in net borrowing availability under the revolving credit facility and cash on hand.
During the quarter, BLDR repurchased 16.9 million shares of its stock for $990.7 million.
Buyouts
On Apr 1, 2022, BLDR wrapped up the acquisition of both the Texas Panel Truss and East Panel Truss businesses for an aggregate of $150 million.
Additionally, Builders FirstSource acquired Valley Truss Co., Inc. — a provider of building components to the single and multi-family markets in Boise, ID — for $30.5 million.
On Jul 1, 2022, BLDR acquired a provider of building products in Flagstaff, AZ, HomCo Lumber and Hardware.
Guidance
For 2022, the company now expects free cash flow between $2.5-$3 billion versus $2-$2.4 billion expected earlier. Interest expense is expected in the range of $175 million to $185 million. BLDR projects an effective tax rate between 23% and 25%, total capital expenditures between $275 million and $325 million, depreciation and amortization expenses between $460 million and $480 million for 2022.
Acquisitions will likely contribute to net sales growth between 6% and 7%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -6.86% due to these changes.
VGM Scores
Currently, Builders FirstSource has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Builders FirstSource (BLDR) Down 14.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have lost about 14.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Builders FirstSource due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Builders FirstSource Up on Q2 Earnings & Revenue Beat
Builders FirstSource released its second-quarter 2022 results, wherein it reported 12.2% core organic sales growth.
The company’s earnings and net sales surpassed the Zacks Consensus Estimate and increased significantly year over year. The results were driven by an increase in net sales and gross margin as well as contributions from acquisitions amid continuous raw material supply woes.
Dave Flitman, President and CEO of Builders FirstSource, said, “I remain optimistic on the prospects for our industry over the long term and confident in our ability to outperform the market as we execute our strategy and further invest in margin accretive, value-added products and transformative digital solutions. We also remain fully committed to leveraging our strong cash flow profile to strategically deploy capital toward a combination of high return internal investments, accretive bolt-on M&A and returns to shareholders.”
Peter Jackson, CFO of Builders FirstSource, added, “Looking ahead, we are exceptionally well-positioned to capture organic and inorganic value-enhancing growth opportunities and expand our market-leading positions. For 2022, we remain focused on delivering strong double-digit base business growth and significant free cash flow.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $6.26 per share, which handily topped the consensus mark of $3.00. The reported figure also increased by a significant 126.8% from the year-ago quarter.
For the quarter, net sales of $6.93 billion surpassed the consensus mark of $5.45 billion. The top line grew 24.2% on a year-over-year basis. Core organic sales grew 12.2% from the prior-year quarter. Commodity price inflation contributed 3.9% to net sales. Acquisitions added 8.1% to net sales growth. The upside was led by solid demand for its products amid supply woes.
Notably, core organic sales in value-added products increased 32% compared with the prior-year period.
Core organic customer growth in Single Family increased 15.8%, while R&R/Other and Multi Family remained almost flat year over year.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 42.2% of the quarterly net sales) were $2.92 billion, up 50.9% from the prior year.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 16.9% of the quarterly net sales) increased 12.3% from the year-ago quarter to $1.17 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 40.9% of the quarterly net sales) increased 9.1% year over year to $2.83 billion.
Operating Highlights
Gross profit for the quarter increased 52.4% year over year to $2.4 billion. Gross margin of 34.8% expanded 640 basis points (bps) year over year owing to higher sales in value-added product categories, disciplined pricing in a volatile, supply-constrained marketplace and effective and timely sourcing. As a percentage of net sales, total SG&A expenses improved 110 bps to 15.1%.
Adjusted EBITDA increased 80.3% on a year-over-year basis to $1.5 billion, primarily driven by core organic growth, commodity inflation, and acquisitions. Adjusted EBITDA margin expanded 680 bps year over year to 21.8%.
Other Financial Details
As of Jun 30, 2022, Builders FirstSource had cash and cash equivalents of $166.2 million compared with $42.6 million at 2021-end. Long-term debt — net of current portion — was $3.55 billion, up from $2.93 billion at 2021-end.
The company had liquidity of $1 billion at June 2022 end, consisting of approximately $0.8 billion in net borrowing availability under the revolving credit facility and cash on hand.
During the quarter, BLDR repurchased 16.9 million shares of its stock for $990.7 million.
Buyouts
On Apr 1, 2022, BLDR wrapped up the acquisition of both the Texas Panel Truss and East Panel Truss businesses for an aggregate of $150 million.
Additionally, Builders FirstSource acquired Valley Truss Co., Inc. — a provider of building components to the single and multi-family markets in Boise, ID — for $30.5 million.
On Jul 1, 2022, BLDR acquired a provider of building products in Flagstaff, AZ, HomCo Lumber and Hardware.
Guidance
For 2022, the company now expects free cash flow between $2.5-$3 billion versus $2-$2.4 billion expected earlier. Interest expense is expected in the range of $175 million to $185 million. BLDR projects an effective tax rate between 23% and 25%, total capital expenditures between $275 million and $325 million, depreciation and amortization expenses between $460 million and $480 million for 2022.
Acquisitions will likely contribute to net sales growth between 6% and 7%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -6.86% due to these changes.
VGM Scores
Currently, Builders FirstSource has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.