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Beacon's (BECN) Q1 Earnings Top, Revenues Miss, Stock Down

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Beacon Roofing Supply, Inc. (BECN - Free Report) reported mixed results for first-quarter 2023 wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, revenues increased but earnings declined.

Shares of the company plunged almost 4% in the after-hours trading session on May 4, post the earnings release.

Earnings & Revenue Discussion

This distributor of building products reported adjusted earnings of 67 cents per share, which topped the consensus mark of 61 cents by 9.8%. Adjusted earnings were however down 24.7% from 89 cents per share reported in the prior-year quarter.

For the quarter, net sales of $1,732.3 million missed the consensus mark of $1,776.6 million by 2.5%. The top line grew 2.7% on a year-over-year basis, driven by solid execution on the Ambition 2025 growth program, including acquisitions and opening of greenfield locations, as well as strong pricing.

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Beacon Roofing Supply, Inc. price-consensus-eps-surprise-chart | Beacon Roofing Supply, Inc. Quote

During the quarter, the weighted-average selling price increased approximately 9-10% but volumes reduced 11-12%.

Sales According to Line of Business

Residential Roofing Product: For the reported quarter, sales of this product line (comprising 49% of quarterly net sales) were $849.8 million, up 0.4% from the prior year.

Non-Residential Roofing Product: Sales (comprising 26% of the quarterly net sales) declined 7.8% from the year-ago quarter to $449.6 million.

Complementary Product: For the quarter, sales of this product line (comprising 25% of quarterly net sales) increased 22.7% year over year to $432.9 million.

Operating Highlights

The gross margin of 25.5% was down 60 basis points (bps) year over year due to higher product costs, reflective of inventory profit roll-off in a stable pricing environment, majorly offset by higher average selling prices of the company’s products.

Adjusted operating margin increased to 20.6% from 19.2% a year ago, owing to increases done to support new and acquired branches.

Adjusted EBITDA declined 19% on a year-over-year basis to $113 million due to higher operating expenses and costs. Adjusted EBITDA margin contracted 180 bps year over year to 6.5%.

Other Financial Details

As of Mar 31, 2023, the company had cash and cash equivalents of $74.2 million compared with $67.7 million at 2022-end and $52.4 million at March 2022-end. Long-term debt, net was $1,604.8 million, slightly down from the 2022-end value of $1,606.4 million and $1,611.2 million as of Mar 31, 2022.

Net cash provided by operating activities was $101.2 million in first quarter versus net cash used in operating activities of $162 million in the year-ago quarter.

Q2 View

In the second quarter of 2023, the company expects net sales to decrease approximately 2% on a year-over-year basis. The gross margin is expected to be in the mid-to-high 25%.

2023 Guidance Retained

Net sales growth is anticipated to be between 2% and 4% for 2023.

Adjusted EBITDA is expected to be in the range of $810 million to $870 million.

Continuous investments in greenfield locations are expected to yield 15 new locations in 2023.

Zacks Rank & Key Picks

Beacon Roofing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.

Chipotle Mexican Grill, Inc. (CMG - Free Report) sports a Zacks Rank #1. CMG has a long-term earnings growth rate of 31.8%. The shares of the company have risen 45.6% in the past six months.

The Zacks Consensus Estimate for CMG’s 2023 sales and EPS suggests growth of 13.8% and 32.6%, respectively, from the year-ago period’s levels.

Arcos Dorados Holdings Inc. (ARCO - Free Report) currently sports a Zacks Rank #1. ARCO has a long-term earnings growth rate of 7.8%. The shares of the company have gained 5.9% in the past six months.

The Zacks Consensus Estimate for ARCO’s 2023 sales suggests growth of 13.4% from the year-ago period’s levels.

Chuy's Holdings, Inc. (CHUY - Free Report) carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of the company have increased 12.2% in the past six months.

The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 10.9% and 19%, respectively, from the year-ago period’s levels.

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