Back to top

Image: Shutterstock

GMS Gears Up to Report Q2 Earnings: Will It Disappoint?

Read MoreHide Full Article

GMS Inc. (GMS - Free Report) is scheduled to report second-quarter fiscal 2024 results on Dec 7, before market open.

In the last reported quarter, the company’s earnings met the Zacks Consensus Estimate but declined 1.2% year over year. On the other hand, net sales beat the consensus mark by 2.7% and increased 3.7% year over year.

GMS’ earnings outpaced the consensus mark in 15 of the last 17 quarters, missed in one and met in the other.

The Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share remained stable at $2.24 in the past 60 days. The figure indicates a 19.7% decline from the year-ago quarter’s level.

GMS Inc. Price and EPS Surprise

GMS Inc. Price and EPS Surprise

GMS Inc. price-eps-surprise | GMS Inc. Quote

The consensus mark for net sales is pegged at $1.39 billion, implying a 3.1% decline from the year-ago reported figure.

Key Factors to Note

GMS is likely to have generated lower earnings and sales in the fiscal second quarter. Although repair and remodeling activities and residential construction have recently shown signs of improvement, delayed housing construction, highly volatile mortgage rates, lower steel prices and inflationary pressure are causes of concern.

For the to-be-reported quarter, the company expects total net sales to be down in low-single-digits, mainly due to lower steel prices. The consensus estimate for organic sales is pegged at negative 4.6%.

Segmentwise, Wallboard’s volumes and price/mix are expected to decline in low single-digits. Volumes are likely to fall in the low double-digit range in single-family due to high mortgage rates, offsetting high single-digit growth in Multi-family and low single-digit rise in Commercial. The consensus mark for sales of Wallboard products is pegged at $550 million, down from $585 million a year ago.

Ceiling volumes are expected to increase in the low single digits on the back of successful business development, but price/mix is likely to fall in the low single digits. The Zacks Consensus Estimate for Ceiling products’ sales is pegged at $160 million, flat year over year.

Steel Framing volumes are projected to grow in high single-digit but price/mix is likely to decline 25%. Prices are expected to drop to low to mid-single digits and volumes are likely to be flat sequentially for the fiscal second quarter. The consensus mark for Steel Framing's sales is pegged at $231 million, indicating a decline from $278 million reported a year ago.

Complementary products’ volume and price/mix are anticipated to increase, resulting in mid-single digit sales growth, including the benefits of recent acquisitions. The consensus mark for Complementary products' sales is pegged at $425 million, indicating an increase from $409 million reported a year ago.

GMS anticipates a gross margin of around 32% and adjusted EBITDA in the band of $160-$165 million. In the year-ago period, the gross margin was 32.5% and the adjusted EBITDA was $195.5 million. Inflationary wages and higher maintenance costs, along with acquisition-related expenses, might have ailed the company’s bottom line. The deflationary steel prices have been a major concern for GMS’ Steel Framing business.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for GMS this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as elaborated below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GMS carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Some Recent Retail-Wholesale Releases

Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for the third quarter of fiscal 2023 (ended Oct 29, 2023). In the quarter, WSM's earnings beat the Zacks Consensus Estimate, but revenues missed the same. Both the metrics declined year over year.

The quarterly results reflect low contributions from the company’s reportable brands, driven by ongoing softness witnessed in consumer discretionary spending, especially on furniture. Also, elevated levels of promotional activity and current macroeconomic uncertainties added to the downtrend. That said, Williams-Sonoma’s solid operating model partially offsets the headwinds through its full-price selling, supply-chain efficiencies and top-tier customer service.

Builders FirstSource’s (BLDR - Free Report) third-quarter 2023 earnings and net sales surpassed their respective Zacks Consensus Estimate. However, both metrics declined year over year.

For 2023, the company reduced the upper limit of its net sales projection to $16.8-$17.1 billion from $17.8 billion. Gross margin is now anticipated between 34% and 35% (from 33-35%), adjusted EBITDA in the band of $2.7-$2.8 billion (from $2.6-$2.9 billion) and adjusted EBITDA margin between 15.8% and 16.7% (versus 15-17%).

Beacon Roofing Supply, Inc. (BECN - Free Report) reported mixed results for third-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. The top and bottom lines increased on a year-over-year basis.

The upside was backed by solid demand from the non-discretionary repair and re-roofing market. The company capitalized on this demand, focusing on disciplined pricing, labor productivity and working capital management. Also, the emphasis on Ambition 2025 growth initiatives, strategic investments in greenfields and acquisitions drove top-line growth. The company also raised its full-year expectations.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Published in