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TopBuild (BLD) Up 21% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for TopBuild (BLD - Free Report) . Shares have added about 21% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TopBuild due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

TopBuild’s Q3 Earnings & Net Sales Beat, '23 Views Rise

TopBuild reported impressive results for third-quarter 2023. Its earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.

Strategic focus on multifamily and commercial work and the emphasis on operational excellence and solid backlog drove results.

Inside the Headlines

The company’s adjusted earnings of $5.43 per share topped the consensus estimate of $4.59 by 18.3%. The bottom line increased 13.1% from the prior year’s $4.80.

Total net sales of $1.326 billion beat the consensus mark of $1.303 billion by 1.8% and increased 1.9% year over year. However, total net sales on a same-branch basis declined 1% year over year.

Segmental Performance

Installation (TruTeam) sales increased 4.9% year over year to $821.7 million. Acquisitions and selling prices contributed 4.8% and 3.6% to sales, respectively. However, volumes reduced sales by 3.5% year over year. Our model suggested the segment’s net sales to be $807.7 million. Adjusted operating margin for the quarter expanded 200 basis points (bps) to 21.6%. Adjusted EBITDA margin improved 210 bps to 23.7% for the quarter.

Revenues of the Specialty Distribution (Service Partners) segment declined 2.1% year over year to $571 million. Volumes and pricing reduced sales year over year by 0.2% and 1.9%, respectively. We expected segmental net sales to be $536.5 million. Adjusted operating margin rose 20 bps from the year-ago level to 15.5%. Adjusted EBITDA margin also improved 20 bps to 18.2% for the quarter.

Operating Highlights

Adjusted gross margin of 31.7% expanded 130 bps on operational efficiencies and strong margins on Installations of multi-family and commercial projects.

Adjusted SG&A expenses, as a percentage of revenues, remained unchanged year over year at 13.2%.

Adjusted operating margin expanded 130 bps from the year-ago period to 18.5%. We anticipated the metric to be 15.9% for the reported quarter.

Adjusted EBITDA grew 9.4% from the year-ago quarter to $283.7 million. Adjusted EBITDA margin improved 150 bps to 21.4% for the quarter. The Zacks model suggested the metric to be 18.7% for the quarter under discussion.

Financial Update

As of Sep 30, 2023, cash and cash equivalents were $615.6 million, up from $240 million at 2022 end. Long-term debt was $1.38 billion, down from $1.42 billion at 2022 end.

For the first nine months of 2023, net cash provided by operating activities was $588.5 million compared with $335.6 million in the year-ago period.

2023 Guidance Raised

TopBuild raised sales expectations to $5,130-$5,210 billion from $5.025-$5.175 billion projected earlier. The estimated figure indicates an increase from $5 billion reported in the year-earlier quarter.

Adjusted EBITDA is now projected to be between $1,025 million and $1,055 million, up from the prior projection of $950-$1,000 million. This suggests growth from $940.6 million reported in 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 6.74% due to these changes.

VGM Scores

Currently, TopBuild has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, 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.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise TopBuild has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

TopBuild belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, United Rentals (URI - Free Report) , has gained 16.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

United Rentals reported revenues of $3.77 billion in the last reported quarter, representing a year-over-year change of +23.4%. EPS of $11.73 for the same period compares with $9.27 a year ago.

For the current quarter, United Rentals is expected to post earnings of $11.42 per share, indicating a change of +17.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for United Rentals. Also, the stock has a VGM Score of A.

See More Zacks Research for These Tickers

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