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Why Is Builders FirstSource (BLDR) Up 8.5% 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 added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Builders FirstSource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Builders FirstSource reported first-quarter 2023 earnings and net sales surpassed the Zacks Consensus Estimate.
However, on a year-over-year basis, the results were hampered by declining single-family starts and commodity deflation.
Nonetheless, the company’s consistent focus on operational excellence, the strength of its product portfolio, continued investments in value-added products, productivity initiatives and digital solutions are expected to navigate the challenging macroeconomic conditions.
BLDR continues to witness gains from its transformed business and remains confident about its long-term normalized gross margin percentage of 28% or higher versus its prior projection of 27% or higher. The company believes that it can sustain a double-digit adjusted EBITDA margin this year.
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $2.96 per share, which handily topped the consensus mark of $1.63 by 81.6%. However, the reported figure decreased 24.1% from the year-ago quarter.
Net sales of $3.9 billion surpassed the consensus mark of $3.6 billion by 8.3% but fell 31.6% on a year-over-year basis. The downside was mainly due to the decrease in single-family starts, the soft housing environment and commodity deflation. A commodity price deflation was 11.8% and core organic sales declined 26.3% from the prior-year quarter. These were partially offset by acquisitions contributing 5.5% to growth and one additional selling day contributing 1.0% to sales. Core organic sales in value-added products declined 16.9% from the prior-year period. Core organic growth in Single Family decreased 34.1%, while R&R/Other and Multi-Family grew 3.1% and 11.5% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 55.9% of the quarterly net sales) were $2.17 billion, down 9.2% from the prior year. Within the segment, Manufactured products sales totaled $1.11 billion (down 18.4% year over year) and Windows, doors & millwork stood at $1.06 billion (up 3.1%).
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 21.6% of the quarterly net sales) decreased 12% from the year-ago quarter to $838.4 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 22.5% of the quarterly net sales) decreased 62.7% year over year to $872.1 billion.
Operating Highlights
Gross profit of $1.37 billion was down 25.2% year over year, but the gross margin of 35.3% expanded 300 basis points (bps) on a higher Multi-Family value-added product category mix. As a percentage of net sales, total SG&A expenses increased 630 bps to 23.3%, owing to lower leverage to net sales.
Adjusted EBITDA fell 36.9% on a year-over-year basis to $631.7 billion. The adjusted EBITDA margin contracted 130 bps year over year to 16.3%.
Financial Details
As of Mar 31, 2023, Builders FirstSource had cash and cash equivalents of $144.4 million compared with $80.4 million at 2022-end. The company had liquidity of $1.4 billion at the first-quarter end, including $1.2 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $3.19 billion, up from $2.98 billion at 2022-end. Net cash from operations was $654.4 million versus $179.8 million a year ago. During the quarter, BLDR repurchased 7.5 million shares of its stock for $627.6 billion. The free cash flow was $554.5 million for the first quarter, reflecting an increase from $423 million a year ago.
Q2 2023 Guidance
For second-quarter 2023, BLDR expects net sales between $4 billion and $4.2 billion. Adjusted EBITDA is expected between $525 million and $575 million. The adjusted EBITDA margin will likely be 13.1-13.7%. In the year-ago period, net sales were $6.93 billion, adjusted EBITDA was $1.5 billion and the adjusted EBITDA margin stood at 21.8%.
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 $325-$375 million and productivity savings of $90-$110 million. Depreciation and amortization expenses are estimated to be between $525 million and $575 million, including $160 million of amortization related to intangible assets acquired in the BMC merger.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 22.5% due to these changes.
VGM Scores
At this time, Builders FirstSource has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Builders FirstSource has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Builders FirstSource (BLDR) Up 8.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Builders FirstSource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Builders FirstSource Q1 Earnings & Sales Beat Estimates
Builders FirstSource reported first-quarter 2023 earnings and net sales surpassed the Zacks Consensus Estimate.
However, on a year-over-year basis, the results were hampered by declining single-family starts and commodity deflation.
Nonetheless, the company’s consistent focus on operational excellence, the strength of its product portfolio, continued investments in value-added products, productivity initiatives and digital solutions are expected to navigate the challenging macroeconomic conditions.
BLDR continues to witness gains from its transformed business and remains confident about its long-term normalized gross margin percentage of 28% or higher versus its prior projection of 27% or higher. The company believes that it can sustain a double-digit adjusted EBITDA margin this year.
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $2.96 per share, which handily topped the consensus mark of $1.63 by 81.6%. However, the reported figure decreased 24.1% from the year-ago quarter.
Net sales of $3.9 billion surpassed the consensus mark of $3.6 billion by 8.3% but fell 31.6% on a year-over-year basis. The downside was mainly due to the decrease in single-family starts, the soft housing environment and commodity deflation. A commodity price deflation was 11.8% and core organic sales declined 26.3% from the prior-year quarter. These were partially offset by acquisitions contributing 5.5% to growth and one additional selling day contributing 1.0% to sales. Core organic sales in value-added products declined 16.9% from the prior-year period. Core organic growth in Single Family decreased 34.1%, while R&R/Other and Multi-Family grew 3.1% and 11.5% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 55.9% of the quarterly net sales) were $2.17 billion, down 9.2% from the prior year. Within the segment, Manufactured products sales totaled $1.11 billion (down 18.4% year over year) and Windows, doors & millwork stood at $1.06 billion (up 3.1%).
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 21.6% of the quarterly net sales) decreased 12% from the year-ago quarter to $838.4 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 22.5% of the quarterly net sales) decreased 62.7% year over year to $872.1 billion.
Operating Highlights
Gross profit of $1.37 billion was down 25.2% year over year, but the gross margin of 35.3% expanded 300 basis points (bps) on a higher Multi-Family value-added product category mix. As a percentage of net sales, total SG&A expenses increased 630 bps to 23.3%, owing to lower leverage to net sales.
Adjusted EBITDA fell 36.9% on a year-over-year basis to $631.7 billion. The adjusted EBITDA margin contracted 130 bps year over year to 16.3%.
Financial Details
As of Mar 31, 2023, Builders FirstSource had cash and cash equivalents of $144.4 million compared with $80.4 million at 2022-end. The company had liquidity of $1.4 billion at the first-quarter end, including $1.2 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $3.19 billion, up from $2.98 billion at 2022-end. Net cash from operations was $654.4 million versus $179.8 million a year ago. During the quarter, BLDR repurchased 7.5 million shares of its stock for $627.6 billion. The free cash flow was $554.5 million for the first quarter, reflecting an increase from $423 million a year ago.
Q2 2023 Guidance
For second-quarter 2023, BLDR expects net sales between $4 billion and $4.2 billion. Adjusted EBITDA is expected between $525 million and $575 million. The adjusted EBITDA margin will likely be 13.1-13.7%. In the year-ago period, net sales were $6.93 billion, adjusted EBITDA was $1.5 billion and the adjusted EBITDA margin stood at 21.8%.
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 $325-$375 million and productivity savings of $90-$110 million. Depreciation and amortization expenses are estimated to be between $525 million and $575 million, including $160 million of amortization related to intangible assets acquired in the BMC merger.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 22.5% due to these changes.
VGM Scores
At this time, Builders FirstSource has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Builders FirstSource has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.