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GMS' Q2 Earnings & Net Sales Surpass Estimates, Decrease Y/Y
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GMS Inc. (GMS - Free Report) reported better-than-expected results for second-quarter fiscal 2024 (ended Oct 31, 2023), wherein both earnings and net sales surpassed their respective Zacks Consensus Estimate.
However, both metrics declined on a year-over-year basis, owing to a steeper-than-anticipated decline in steel pricing and softness in single-family demand.
Shares of the company lost 3.49% on Dec 7, following earnings release.
John C. Turner, Jr., president and chief executive officer of GMS, stated, “In the near term, we anticipate the backlog in multi-family construction to drive continued growth in this end market through the end of fiscal 2024, albeit at declining year-over-year rates. Despite some potential headwinds from tightened credit conditions, our commercial demand is expected to continue its current pace of activity over the next few quarters. Additionally, we are optimistic about improving single-family activity, as the very recent easing of mortgage rates, limited supply of existing homes for sale and favorable demographics seems to be setting up improved conditions, particularly as we look out to fiscal 2025.”
Quarter in Detail
GMS reported adjusted earnings of $2.30 per share, which beat the consensus mark of $2.24 million by 2.7%. The figure, however, declined 17.6% from the year-ago quarter’s level of $2.79 per share.
Net sales of $1.42 billion beat the consensus mark of $1.39 million by 2.5% but decreased 0.7% year over year. Solid demand in commercial and multi-family construction drove volume in Ceilings, Steel Framing and Complementary Products, which were offset by a marked price deflation in Steel Framing, reducing net sales by $85 million for the quarter.
Organic net sales decreased 3.1% from the prior-year level. Wallboard volume grew in the United States, backed by 17% growth in multi-family and 6.5% in commercial, offset by single-family volume decline of 11.4%.
Segment Discussion
Wallboard sales inched up 0.1% from a year ago to $585.2 million. Organically, sales were down 0.3% year over year.
Ceilings sales increased 9.9% year over year to $175.3 million for the quarter. Organically, this segment’s sales rose 7.22% from the year-ago quarter.
Steel Framing sales of $232.1 million fell 16.6% from the prior-year level. Organically, the segment’s sales declined 17.4% year over year.
Complementary Product sales grew 4.8% from the prior year to $428.3 million. Organically, sales fell 1.4% from the year-ago period's actual.
Operating Highlights
Gross profit decreased 1.3% year over year, mainly due to deflationary steel prices. Gross margin contracted 20 bps to 32.3% year over year.
Adjusted selling, general and administrative expenses — as a percentage of net sales — grew 170 basis points (bps) to 20.6% for the quarter.
Adjusted EBITDA of $167.6 million decreased 14.3% year over year. Adjusted EBITDA margin of 11.8% contracted 190 bps from a year ago.
Financials
As of Oct 31, 2023, the company had cash and cash equivalents of $76.5 million, down from $164.7 million at the fiscal 2023-end. Long-term debt (less current portion) amounted to $1.03 billion at October-end, down from $1.04 billion at fiscal 2023-end.
Cash provided by operating activities was $124.7 million in the first six months of fiscal 2024 versus $102.9 million in cash used in operating activities a year ago.
During the second quarter, GMS repurchased 688,717 shares of common stock for $44.3 million. In October, the company authorized a new share repurchase program to buyback up to $250 million of its outstanding common stock, replacing the previous program. As of Oct 31, 2023, it had $241.3 million of share repurchase authorization remaining.
Builders FirstSource’s (BLDR) 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 the range of $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, with earnings surpassing the Zacks Consensus Estimate and revenues missing 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. The emphasis on Ambition 2025 growth initiatives, strategic investments in greenfields and acquisitions drove top-line growth. BECN also lifted its full-year expectations.
Fastenal Company (FAST - Free Report) reported third-quarter 2023 results. Earnings topped the Zacks Consensus Estimate, but net sales missed the same. Both the top and bottom lines increased on a year-over-year basis, given daily sales growth, good expense control and lower net interest expenses.
Daily sales of $29.3 million increased 4% year over year in the reported quarter. In the third quarter of 2023, Fastenal witnessed an upswing in unit sales, primarily attributed to robust growth at its Onsite locations, especially those established within the past two years. This strong performance effectively mitigated the effects of decreased demand from manufacturing customers and reduced revenues from construction and reseller customers. Additionally, foreign exchange fluctuations exerted a minor downward pressure on third-quarter sales, accounting for approximately a 10-basis point decrease.
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GMS' Q2 Earnings & Net Sales Surpass Estimates, Decrease Y/Y
GMS Inc. (GMS - Free Report) reported better-than-expected results for second-quarter fiscal 2024 (ended Oct 31, 2023), wherein both earnings and net sales surpassed their respective Zacks Consensus Estimate.
However, both metrics declined on a year-over-year basis, owing to a steeper-than-anticipated decline in steel pricing and softness in single-family demand.
Shares of the company lost 3.49% on Dec 7, following earnings release.
John C. Turner, Jr., president and chief executive officer of GMS, stated, “In the near term, we anticipate the backlog in multi-family construction to drive continued growth in this end market through the end of fiscal 2024, albeit at declining year-over-year rates. Despite some potential headwinds from tightened credit conditions, our commercial demand is expected to continue its current pace of activity over the next few quarters. Additionally, we are optimistic about improving single-family activity, as the very recent easing of mortgage rates, limited supply of existing homes for sale and favorable demographics seems to be setting up improved conditions, particularly as we look out to fiscal 2025.”
Quarter in Detail
GMS reported adjusted earnings of $2.30 per share, which beat the consensus mark of $2.24 million by 2.7%. The figure, however, declined 17.6% from the year-ago quarter’s level of $2.79 per share.
GMS Inc. Price, Consensus and EPS Surprise
GMS Inc. price-consensus-eps-surprise-chart | GMS Inc. Quote
Net sales of $1.42 billion beat the consensus mark of $1.39 million by 2.5% but decreased 0.7% year over year. Solid demand in commercial and multi-family construction drove volume in Ceilings, Steel Framing and Complementary Products, which were offset by a marked price deflation in Steel Framing, reducing net sales by $85 million for the quarter.
Organic net sales decreased 3.1% from the prior-year level. Wallboard volume grew in the United States, backed by 17% growth in multi-family and 6.5% in commercial, offset by single-family volume decline of 11.4%.
Segment Discussion
Wallboard sales inched up 0.1% from a year ago to $585.2 million. Organically, sales were down 0.3% year over year.
Ceilings sales increased 9.9% year over year to $175.3 million for the quarter. Organically, this segment’s sales rose 7.22% from the year-ago quarter.
Steel Framing sales of $232.1 million fell 16.6% from the prior-year level. Organically, the segment’s sales declined 17.4% year over year.
Complementary Product sales grew 4.8% from the prior year to $428.3 million. Organically, sales fell 1.4% from the year-ago period's actual.
Operating Highlights
Gross profit decreased 1.3% year over year, mainly due to deflationary steel prices. Gross margin contracted 20 bps to 32.3% year over year.
Adjusted selling, general and administrative expenses — as a percentage of net sales — grew 170 basis points (bps) to 20.6% for the quarter.
Adjusted EBITDA of $167.6 million decreased 14.3% year over year. Adjusted EBITDA margin of 11.8% contracted 190 bps from a year ago.
Financials
As of Oct 31, 2023, the company had cash and cash equivalents of $76.5 million, down from $164.7 million at the fiscal 2023-end. Long-term debt (less current portion) amounted to $1.03 billion at October-end, down from $1.04 billion at fiscal 2023-end.
Cash provided by operating activities was $124.7 million in the first six months of fiscal 2024 versus $102.9 million in cash used in operating activities a year ago.
During the second quarter, GMS repurchased 688,717 shares of common stock for $44.3 million. In October, the company authorized a new share repurchase program to buyback up to $250 million of its outstanding common stock, replacing the previous program. As of Oct 31, 2023, it had $241.3 million of share repurchase authorization remaining.
Zacks Rank & Recent Releases
GMS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Builders FirstSource’s (BLDR) 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 the range of $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, with earnings surpassing the Zacks Consensus Estimate and revenues missing 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. The emphasis on Ambition 2025 growth initiatives, strategic investments in greenfields and acquisitions drove top-line growth. BECN also lifted its full-year expectations.
Fastenal Company (FAST - Free Report) reported third-quarter 2023 results. Earnings topped the Zacks Consensus Estimate, but net sales missed the same. Both the top and bottom lines increased on a year-over-year basis, given daily sales growth, good expense control and lower net interest expenses.
Daily sales of $29.3 million increased 4% year over year in the reported quarter. In the third quarter of 2023, Fastenal witnessed an upswing in unit sales, primarily attributed to robust growth at its Onsite locations, especially those established within the past two years. This strong performance effectively mitigated the effects of decreased demand from manufacturing customers and reduced revenues from construction and reseller customers. Additionally, foreign exchange fluctuations exerted a minor downward pressure on third-quarter sales, accounting for approximately a 10-basis point decrease.