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Gibraltar (ROCK) Slips 5.6% in a Month Despite Strong Views
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Gibraltar Industries Inc. (ROCK - Free Report) stock fell 6.1% in the past month compared with the Zacks Building Products - Miscellaneous industry’s 3.1% growth. Although adjusted earnings topped the Zacks Consensus Estimate by 1.4% and increased 28.6% year over year, material, labor and supply-related challenges, project delays and disrupted solar project schedules ailed.
Also, net sales lagged the consensus mark by 3.2% and fell 6.1% from the prior year’s levels. On an adjusted basis, the top line declined 5.2% year over year and organically by 9.8%. The decline was caused by lower revenues from Residential, Renewables and Agtech businesses. Order backlog at 2022-end declined 12% from 2021.
On the contrary, the company is well poised to benefit from its solid Three-Pillar growth strategy and robust Infrastructure segment’s performance. Fourth quarter’s bottom line performance was driven by strong contributions from the Renewables and Infrastructure segments. The upside was backed by material cost alignment, field operations efficiency, price management, business mix, 80/20 initiatives and the share repurchase program.
Image Source: Zacks Investment Research
Let’s see what are the factors that are offsetting these positives.
Inflation Woes: Since 2020, inflation in material costs impacted ROCK’s business. During 2022, the company continued to witness higher costs related to labor and material. Also, the company had to face challenges regarding the supply of raw materials as well as logistics management. In Residential business, adjusted operating and adjusted EBITDA margins contracted 320 and 300 bps, respectively, in fourth-quarter 2022. The alignment of price and material costs and the timing of changes in commodity indexes as well as the QAP buyout impacted margins. Agtech’s adjusted operating margins declined 420 bps and adjusted EBITDA margin was down 350 bps year over year. Notably, the company expects these issues to continue for most of 2023.
Low Backlog: At 2022 end, the company had approximately $300 million of backlog from continuing operations, down 12% from $344 million at 2021-end. The backlog primarily relates to certain business units in the Company's Renewables, Agtech and Infrastructure segments.
The Renewables segment’s backlog decreased 17%, as the market demand for solar panel installation continues to be impacted by the UFLPA, which was implemented in June 2022, along with the impact of the Department of Commerce's preliminary ruling on its solar panel AD/CVD anti-circumvention investigation, which has impacted the scheduling of projects.
Order backlog at Agtech was also impacted by continued rescheduling and rescoping of projects and decreased 13% year over year.
Supply-Related Woes: Over the last few quarters, the company has been witnessing supply chain issues. The company continues to witness material and labor supply-related challenges as well as other COVID-associated crises. In the fourth quarter, the company continued to witness project delays and disrupted solar project schedules. Its Renewables and Agtech’s revenue decreased 20.8% and 17.4% year over year, respectively. The company is still dealing with panel supply issues for the U.S. solar industry, as 80% of the key materials and components for panels are produced in China.
Some other top-ranked stocks in the same space are:
Installed Building Products, Inc. (IBP - Free Report) : The company is a leading installer of insulation and complementary building products. It primarily banks on a robust pipeline of acquisition opportunities across multiple geographies, products and end markets.
Installed Building’s earnings for 2023 are expected to decline 6%. It currently sports a Zacks Rank #1.
Simpson Manufacturing Co., Inc. (SSD - Free Report) : The company designs, engineers and manufactures high-quality wood and concrete building construction products designed to make structures safer and more secure that perform at high levels. It has been benefiting from product price increases and key growth initiatives.
Simpson’s earnings for 2023 are expected to decrease by 16.8%. It currently sports a Zacks Rank #1.
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). The long-term earnings growth rate of the company is 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 28.3%, respectively, from the previous year’s reported levels.
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Gibraltar (ROCK) Slips 5.6% in a Month Despite Strong Views
Gibraltar Industries Inc. (ROCK - Free Report) stock fell 6.1% in the past month compared with the Zacks Building Products - Miscellaneous industry’s 3.1% growth. Although adjusted earnings topped the Zacks Consensus Estimate by 1.4% and increased 28.6% year over year, material, labor and supply-related challenges, project delays and disrupted solar project schedules ailed.
Also, net sales lagged the consensus mark by 3.2% and fell 6.1% from the prior year’s levels. On an adjusted basis, the top line declined 5.2% year over year and organically by 9.8%. The decline was caused by lower revenues from Residential, Renewables and Agtech businesses. Order backlog at 2022-end declined 12% from 2021.
On the contrary, the company is well poised to benefit from its solid Three-Pillar growth strategy and robust Infrastructure segment’s performance. Fourth quarter’s bottom line performance was driven by strong contributions from the Renewables and Infrastructure segments. The upside was backed by material cost alignment, field operations efficiency, price management, business mix, 80/20 initiatives and the share repurchase program.
Image Source: Zacks Investment Research
Let’s see what are the factors that are offsetting these positives.
Inflation Woes: Since 2020, inflation in material costs impacted ROCK’s business. During 2022, the company continued to witness higher costs related to labor and material. Also, the company had to face challenges regarding the supply of raw materials as well as logistics management. In Residential business, adjusted operating and adjusted EBITDA margins contracted 320 and 300 bps, respectively, in fourth-quarter 2022. The alignment of price and material costs and the timing of changes in commodity indexes as well as the QAP buyout impacted margins. Agtech’s adjusted operating margins declined 420 bps and adjusted EBITDA margin was down 350 bps year over year. Notably, the company expects these issues to continue for most of 2023.
Low Backlog: At 2022 end, the company had approximately $300 million of backlog from continuing operations, down 12% from $344 million at 2021-end. The backlog primarily relates to certain business units in the Company's Renewables, Agtech and Infrastructure segments.
The Renewables segment’s backlog decreased 17%, as the market demand for solar panel installation continues to be impacted by the UFLPA, which was implemented in June 2022, along with the impact of the Department of Commerce's preliminary ruling on its solar panel AD/CVD anti-circumvention investigation, which has impacted the scheduling of projects.
Order backlog at Agtech was also impacted by continued rescheduling and rescoping of projects and decreased 13% year over year.
Supply-Related Woes: Over the last few quarters, the company has been witnessing supply chain issues. The company continues to witness material and labor supply-related challenges as well as other COVID-associated crises. In the fourth quarter, the company continued to witness project delays and disrupted solar project schedules. Its Renewables and Agtech’s revenue decreased 20.8% and 17.4% year over year, respectively. The company is still dealing with panel supply issues for the U.S. solar industry, as 80% of the key materials and components for panels are produced in China.
Zacks Rank & Stocks to Consider
ROCK currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the same space are:
Installed Building Products, Inc. (IBP - Free Report) : The company is a leading installer of insulation and complementary building products. It primarily banks on a robust pipeline of acquisition opportunities across multiple geographies, products and end markets.
Installed Building’s earnings for 2023 are expected to decline 6%. It currently sports a Zacks Rank #1.
Simpson Manufacturing Co., Inc. (SSD - Free Report) : The company designs, engineers and manufactures high-quality wood and concrete building construction products designed to make structures safer and more secure that perform at high levels. It has been benefiting from product price increases and key growth initiatives.
Simpson’s earnings for 2023 are expected to decrease by 16.8%. It currently sports a Zacks Rank #1.
United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). The long-term earnings growth rate of the company is 16.3%.
The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 28.3%, respectively, from the previous year’s reported levels.