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Builders FirstSource’s (BLDR - Free Report) shares gained 4.04% on Feb 28 after its fourth-quarter 2022 earnings surpassed the Zacks Consensus Estimate and increased strongly year over year. Net sales surpassed the consensus mark but declined year over year.
The results were hampered by declining single-family starts, two fewer selling days and commodity deflation, partially offset by growth from acquisitions.
Dave Rush, CEO of Builders FirstSource, said, “Our continuing focus on growing value-added products and operational excellence helped us to produce record full-year 2022 Adjusted EBITDA of $4.4 billion. While economic conditions have become more complex in recent months, I am confident that our exceptional geographic and end-market exposure as well as our experienced management team will lead us to achieve our strategic growth priorities.”
He added, “As we move into 2023, we will maintain our disciplined approach to capital deployment to ensure that we can continue to drive long-term value creation for our shareholders.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $3.21 per share, which handily topped the consensus mark of $2.37 by 35.4%. The reported figure also increased 15.5% from the year-ago quarter.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
Net sales of $4.36 billion surpassed the consensus mark of $4.23 billion by 2.8% but fell 6% on a year-over-year basis. Core organic sales also declined 7.7% from the prior-year quarter. A commodity price deflation of 3% of net sales and a decline of 3.2% due to two fewer selling days were partially offset by acquisitions contribution of 7.9%. Core organic sales in value-added products inched up 0.6% from the prior-year period.
Core organic growth in Single Family decreased 13.9%, while R&R/Other and Multi-Family grew 14.9% and 15.1% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 52.3% of the quarterly net sales) were $2.28 billion, up 8.3% from the prior year. Within the segment, Manufactured products totaled $1.15 billion and Windows, doors & millwork stood at $1.13 billion compared with $1.18 billion and $924.9 million, respectively, a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 22.5% of the quarterly net sales) increased 15.5% from the year-ago quarter to $980.5 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.2% of the quarterly net sales) decreased 34.7% year over year to $1.1 billion.
Operating Highlights
Gross profit of $1.5 billion was flat year over year but the gross margin of 34.1% expanded 200 basis points (bps) on increased value-added product category mix. As a percentage of net sales, total SG&A expenses increased 340 bps to 22%.
Adjusted EBITDA fell 12.2% on a year-over-year basis to $0.7 billion. The adjusted EBITDA margin contracted 110 bps year over year to 16%.
2022 Highlights
In 2022, BLDR generated net sales of $22.7 billion, up 14.2% from the previous year. Of this growth, acquisitions contributed 1.1%, core organic sales supported 6.6% and commodity inflation added 1.1%. This was partially offset by two fewer selling days that impacted sales by 0.8%.
Adjusted earnings of $18.71 per share increased from $10.32 reported in 2021. The 45.7% improvement was backed by net sales growth, a higher mix of sales from value-added product categories and disciplined pricing, partially offset by higher income tax and SG&A expenses.
The adjusted EBITDA margin rose 390 bps from the prior-year period to 19.3%.
Financial Details
As of Dec 31, 2022, Builders FirstSource had cash and cash equivalents of $80.4 million compared with $42.6 million at 2021-end. The company had liquidity of $1.5 billion at 2022-end, including $1.4 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $2.98 billion, up from $2.93 billion at 2021-end.
Net cash from operations was $3.6 billion versus $1.74 billion in 2021. During the year, BLDR repurchased 41.9 million shares of its stock at an average price of $61.79 per share for $2.6 billion. Free cash flow was $3.27 billion for 2022.
Guidance
For first-quarter 2023, BLDR expects net sales between $3.4 billion and $3.7 billion. Adjusted EBITDA is expected between $400 million and $440 million. The adjusted EBITDA margin will likely be 11.7-11.9%. In first-quarter 2022, net sales were $5.7 billion, adjusted EBITDA was $1 billion and the adjusted EBITDA margin stood at 17.6%.
Due to the challenging housing market conditions, which may significantly impact the business, the company is not providing guidance for 2023 but will reassess each quarter.
For 2023, the company expects interest expenses of $150-$170 million, an effective tax rate of 23-25%, total capital expenditure of$300-$350 million and productivity savings of $90-$110 million. Depreciation and amortization expenses are estimated between $525 million and $550 million, including $160 million of amortization related to intangible assets acquired in the BMC merger.
Beacon Roofing Supply, Inc. (BECN - Free Report) reported lower-than-expected results for fourth-quarter 2022. Earnings and revenues missed the Zacks Consensus Estimate after beating in the preceding four quarters. Revenues increased but earnings declined on a year-over-year basis.
In the first quarter of 2023, BECN expects net sales to increase 5% on a year-over-year basis. The gross margin is expected to be 25.5%.
Papa John’s International, Inc. (PZZA - Free Report) reported fourth-quarter fiscal 2022 results, with earnings and revenues beating the Zacks Consensus Estimate. However, the top and the bottom lines declined on a year-over-year basis.
PZZA cited a challenging macro environment, including softening economic conditions (in the U.K.), food and wage inflation and high energy prices. The company anticipates international comp sales to remain under pressure throughout 2023.
The Cheesecake Factory Incorporated (CAKE - Free Report) reported fourth-quarter fiscal 2022 results, wherein earnings met the Zacks Consensus Estimate but revenues missed the same. The top and bottom lines rose year over year, courtesy of incremental pricing and cost-saving efforts despite the continued inflation, volatility and a dynamic operating environment.
David Overton, chairman and CEO of Cheesecake Factory, stated, “During the quarter, we opened eight new restaurants and successfully implemented incremental pricing to support our stated objective of recovering our operating margins. We believe the strong consumer demand we experienced at our new restaurant openings and continued positive sales trends following our pricing actions demonstrate the strength and resilience of our concepts.”
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Builders FirstSource (BLDR) Q4 Earnings Beat, Margins Dip
Builders FirstSource’s (BLDR - Free Report) shares gained 4.04% on Feb 28 after its fourth-quarter 2022 earnings surpassed the Zacks Consensus Estimate and increased strongly year over year. Net sales surpassed the consensus mark but declined year over year.
The results were hampered by declining single-family starts, two fewer selling days and commodity deflation, partially offset by growth from acquisitions.
Dave Rush, CEO of Builders FirstSource, said, “Our continuing focus on growing value-added products and operational excellence helped us to produce record full-year 2022 Adjusted EBITDA of $4.4 billion. While economic conditions have become more complex in recent months, I am confident that our exceptional geographic and end-market exposure as well as our experienced management team will lead us to achieve our strategic growth priorities.”
He added, “As we move into 2023, we will maintain our disciplined approach to capital deployment to ensure that we can continue to drive long-term value creation for our shareholders.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $3.21 per share, which handily topped the consensus mark of $2.37 by 35.4%. The reported figure also increased 15.5% from the year-ago quarter.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
Builders FirstSource, Inc. price-consensus-eps-surprise-chart | Builders FirstSource, Inc. Quote
Net sales of $4.36 billion surpassed the consensus mark of $4.23 billion by 2.8% but fell 6% on a year-over-year basis. Core organic sales also declined 7.7% from the prior-year quarter. A commodity price deflation of 3% of net sales and a decline of 3.2% due to two fewer selling days were partially offset by acquisitions contribution of 7.9%. Core organic sales in value-added products inched up 0.6% from the prior-year period.
Core organic growth in Single Family decreased 13.9%, while R&R/Other and Multi-Family grew 14.9% and 15.1% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 52.3% of the quarterly net sales) were $2.28 billion, up 8.3% from the prior year. Within the segment, Manufactured products totaled $1.15 billion and Windows, doors & millwork stood at $1.13 billion compared with $1.18 billion and $924.9 million, respectively, a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 22.5% of the quarterly net sales) increased 15.5% from the year-ago quarter to $980.5 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.2% of the quarterly net sales) decreased 34.7% year over year to $1.1 billion.
Operating Highlights
Gross profit of $1.5 billion was flat year over year but the gross margin of 34.1% expanded 200 basis points (bps) on increased value-added product category mix. As a percentage of net sales, total SG&A expenses increased 340 bps to 22%.
Adjusted EBITDA fell 12.2% on a year-over-year basis to $0.7 billion. The adjusted EBITDA margin contracted 110 bps year over year to 16%.
2022 Highlights
In 2022, BLDR generated net sales of $22.7 billion, up 14.2% from the previous year. Of this growth, acquisitions contributed 1.1%, core organic sales supported 6.6% and commodity inflation added 1.1%. This was partially offset by two fewer selling days that impacted sales by 0.8%.
Adjusted earnings of $18.71 per share increased from $10.32 reported in 2021. The 45.7% improvement was backed by net sales growth, a higher mix of sales from value-added product categories and disciplined pricing, partially offset by higher income tax and SG&A expenses.
The adjusted EBITDA margin rose 390 bps from the prior-year period to 19.3%.
Financial Details
As of Dec 31, 2022, Builders FirstSource had cash and cash equivalents of $80.4 million compared with $42.6 million at 2021-end. The company had liquidity of $1.5 billion at 2022-end, including $1.4 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $2.98 billion, up from $2.93 billion at 2021-end.
Net cash from operations was $3.6 billion versus $1.74 billion in 2021. During the year, BLDR repurchased 41.9 million shares of its stock at an average price of $61.79 per share for $2.6 billion. Free cash flow was $3.27 billion for 2022.
Guidance
For first-quarter 2023, BLDR expects net sales between $3.4 billion and $3.7 billion. Adjusted EBITDA is expected between $400 million and $440 million. The adjusted EBITDA margin will likely be 11.7-11.9%. In first-quarter 2022, net sales were $5.7 billion, adjusted EBITDA was $1 billion and the adjusted EBITDA margin stood at 17.6%.
Due to the challenging housing market conditions, which may significantly impact the business, the company is not providing guidance for 2023 but will reassess each quarter.
For 2023, the company expects interest expenses of $150-$170 million, an effective tax rate of 23-25%, total capital expenditure of$300-$350 million and productivity savings of $90-$110 million. Depreciation and amortization expenses are estimated between $525 million and $550 million, including $160 million of amortization related to intangible assets acquired in the BMC merger.
Zacks Rank & Recent Releases
BLDR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Beacon Roofing Supply, Inc. (BECN - Free Report) reported lower-than-expected results for fourth-quarter 2022. Earnings and revenues missed the Zacks Consensus Estimate after beating in the preceding four quarters. Revenues increased but earnings declined on a year-over-year basis.
In the first quarter of 2023, BECN expects net sales to increase 5% on a year-over-year basis. The gross margin is expected to be 25.5%.
Papa John’s International, Inc. (PZZA - Free Report) reported fourth-quarter fiscal 2022 results, with earnings and revenues beating the Zacks Consensus Estimate. However, the top and the bottom lines declined on a year-over-year basis.
PZZA cited a challenging macro environment, including softening economic conditions (in the U.K.), food and wage inflation and high energy prices. The company anticipates international comp sales to remain under pressure throughout 2023.
The Cheesecake Factory Incorporated (CAKE - Free Report) reported fourth-quarter fiscal 2022 results, wherein earnings met the Zacks Consensus Estimate but revenues missed the same. The top and bottom lines rose year over year, courtesy of incremental pricing and cost-saving efforts despite the continued inflation, volatility and a dynamic operating environment.
David Overton, chairman and CEO of Cheesecake Factory, stated, “During the quarter, we opened eight new restaurants and successfully implemented incremental pricing to support our stated objective of recovering our operating margins. We believe the strong consumer demand we experienced at our new restaurant openings and continued positive sales trends following our pricing actions demonstrate the strength and resilience of our concepts.”