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GMS Q3 Earnings Miss Estimates, Adjusted EBITDA Up Y/Y (revised)
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GMS Inc. (GMS - Free Report) reported mixed results for third-quarter fiscal 2023 (ended Jan 31, 2023). Earnings missed the Zacks Consensus Estimate, but revenues beat the same. Both metrics improved on a year-over-year basis, driven by continued strength in multi-family, improved commercial activity and continued expansion of Complementary Products.
Yet, the early stages of a slowdown in single-family construction and inclement weather hurt the company. Shares of the company fell 5.1% on Mar 2, post-earnings release.
John C. Turner, Jr., president and CEO of GMS, stated, “As we look to close out fiscal 2023 at the end of April, it appears single-family demand will continue to soften while multi-family and commercial activity should improve seasonally with continuing year-over-year growth. During this period, we expect to see year-over-year pricing in Wallboard, Ceilings and Complementary Products remain resilient. Similar to this quarter, however, pricing and volumes in Steel Framing will likely remain challenged.”
Turner added, “Given these end market dynamics, subsequent to the end of the quarter, the company implemented cost reduction initiatives to better align our operations with the current demand outlook. As phased in, these initiatives are expected to reduce fixed SG&A expenses by approximately $15 million on an annualized basis. Approximately $2.5 million in one-time execution costs related to these reductions will be recorded during our fiscal fourth quarter.”
Quarter in Detail
GMS reported adjusted earnings of $1.85 per share, which lagged the consensus mark of $1.86 by 0.5% but increased 6.3% from the year-ago quarter’s $1.74.
Net sales of $1,235 million topped the consensus mark of $1,205 million by 2.4% and increased 7% year over year. The upside was primarily driven by 19.9% multi-family and 5.6% commercial Wallboard volume growth in the United States, partially offset by single-family volume declines of 10.6%. Organic net sales expanded 6.4% from the prior-year quarter’s levels.
Segment Discussion
Wallboard sales increased 20.6% from a year ago to $500.7 million. Organically, sales were up 21.2% year over year.
Ceilings sales increased 4.9% year over year to $146.8 million for the quarter. Organically, this segment’s sales rose 5.2% from the year-ago quarter.
Steel framing sales of $234.5 million fell 17.1% from the prior year. Organically, the segment’s sales declined 16.8% from the year-ago figure.
Complementary product sales grew 11.7% from the prior-year period to $352.6 million. Organically, sales improved 8.2% from the year-ago period.
Operating Highlights
Gross margin expanded by 70 basis points (bps) to 32.6% for the quarter, thanks to strong margins in Steel Framing on focused inventory management and project quoting and better execution on negotiated year-end volume incentives. End market mix and Complementary Product margins also worked in favor.
Adjusted selling, general and administrative expenses — as a percentage of net sales — grew 100 bps to 21.4% for the quarter.
Adjusted EBITDA of $140.8 million increased 4.3% from a year ago. Adjusted EBITDA margin of 11.4% contracted 30 bps from a year ago.
Financials
As of Jan 31, 2023, the company had cash and cash equivalents of $186.7 million, up from $101.9 million at the fiscal 2022-end. GMS had $574.4 million in available liquidity under its revolving credit facilities. Long-term debt (less current portion) amounted to $1.17 billion at January-end, up from $1.14 billion at the fiscal 2022-end.
Cash provided by operating activities was $236.9 million in the first nine months of fiscal 2023, versus $19.9 million in cash used in operating activities a year ago. Free cash flow of $203.7 million was also up from the previous year’s negative $53 million.
In its fiscal third quarter, GMS repurchased 656,670 shares of common stock for $33.2 million. As of Jan 31, the company had $128 million remaining under its share repurchase authorization.
Beacon Roofing Supply, Inc. (BECN - Free Report) reported lower-than-expected results for fourth-quarter 2022. Both earnings and revenues missed the respective 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 approximately 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, both the top and bottom lines declined on a year-over-year basis.
PZZA cited a challenging macroeconomic 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 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.”
(NOTE: We are re-issuing this article to correct a mistake. The original version, published earlier today, March 3, 2023, should no longer be relied upon.)
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GMS Q3 Earnings Miss Estimates, Adjusted EBITDA Up Y/Y (revised)
GMS Inc. (GMS - Free Report) reported mixed results for third-quarter fiscal 2023 (ended Jan 31, 2023). Earnings missed the Zacks Consensus Estimate, but revenues beat the same. Both metrics improved on a year-over-year basis, driven by continued strength in multi-family, improved commercial activity and continued expansion of Complementary Products.
Yet, the early stages of a slowdown in single-family construction and inclement weather hurt the company. Shares of the company fell 5.1% on Mar 2, post-earnings release.
John C. Turner, Jr., president and CEO of GMS, stated, “As we look to close out fiscal 2023 at the end of April, it appears single-family demand will continue to soften while multi-family and commercial activity should improve seasonally with continuing year-over-year growth. During this period, we expect to see year-over-year pricing in Wallboard, Ceilings and Complementary Products remain resilient. Similar to this quarter, however, pricing and volumes in Steel Framing will likely remain challenged.”
Turner added, “Given these end market dynamics, subsequent to the end of the quarter, the company implemented cost reduction initiatives to better align our operations with the current demand outlook. As phased in, these initiatives are expected to reduce fixed SG&A expenses by approximately $15 million on an annualized basis. Approximately $2.5 million in one-time execution costs related to these reductions will be recorded during our fiscal fourth quarter.”
Quarter in Detail
GMS reported adjusted earnings of $1.85 per share, which lagged the consensus mark of $1.86 by 0.5% but increased 6.3% from the year-ago quarter’s $1.74.
GMS Inc. Price, Consensus and EPS Surprise
GMS Inc. price-consensus-eps-surprise-chart | GMS Inc. Quote
Net sales of $1,235 million topped the consensus mark of $1,205 million by 2.4% and increased 7% year over year. The upside was primarily driven by 19.9% multi-family and 5.6% commercial Wallboard volume growth in the United States, partially offset by single-family volume declines of 10.6%. Organic net sales expanded 6.4% from the prior-year quarter’s levels.
Segment Discussion
Wallboard sales increased 20.6% from a year ago to $500.7 million. Organically, sales were up 21.2% year over year.
Ceilings sales increased 4.9% year over year to $146.8 million for the quarter. Organically, this segment’s sales rose 5.2% from the year-ago quarter.
Steel framing sales of $234.5 million fell 17.1% from the prior year. Organically, the segment’s sales declined 16.8% from the year-ago figure.
Complementary product sales grew 11.7% from the prior-year period to $352.6 million. Organically, sales improved 8.2% from the year-ago period.
Operating Highlights
Gross margin expanded by 70 basis points (bps) to 32.6% for the quarter, thanks to strong margins in Steel Framing on focused inventory management and project quoting and better execution on negotiated year-end volume incentives. End market mix and Complementary Product margins also worked in favor.
Adjusted selling, general and administrative expenses — as a percentage of net sales — grew 100 bps to 21.4% for the quarter.
Adjusted EBITDA of $140.8 million increased 4.3% from a year ago. Adjusted EBITDA margin of 11.4% contracted 30 bps from a year ago.
Financials
As of Jan 31, 2023, the company had cash and cash equivalents of $186.7 million, up from $101.9 million at the fiscal 2022-end. GMS had $574.4 million in available liquidity under its revolving credit facilities. Long-term debt (less current portion) amounted to $1.17 billion at January-end, up from $1.14 billion at the fiscal 2022-end.
Cash provided by operating activities was $236.9 million in the first nine months of fiscal 2023, versus $19.9 million in cash used in operating activities a year ago. Free cash flow of $203.7 million was also up from the previous year’s negative $53 million.
In its fiscal third quarter, GMS repurchased 656,670 shares of common stock for $33.2 million. As of Jan 31, the company had $128 million remaining under its share repurchase authorization.
Zacks Rank & Recent Releases
GMS 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. Both earnings and revenues missed the respective 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 approximately 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, both the top and bottom lines declined on a year-over-year basis.
PZZA cited a challenging macroeconomic 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 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.”
(NOTE: We are re-issuing this article to correct a mistake. The original version, published earlier today, March 3, 2023, should no longer be relied upon.)