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Builders FirstSource (BLDR) Q4 Earnings Beat, Net Sales Miss
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Builders FirstSource, Inc. (BLDR - Free Report) reported impressive earnings in fourth-quarter 2023. The bottom line surpassed the Zacks Consensus Estimate and improved from the previous year. Despite a challenging operating environment in 2023, where single-family starts witnessed significant reduction, the company delivered mid-teens or better adjusted EBITDA margin for 11 consecutive quarters.
Shares of this manufacturer and supplier of building materials gained 5.3% on Feb 22.
Net sales surpassed the consensus mark but declined year over year due to a slowdown in residential construction demand, particularly in the Single-Family market.
Earnings & Revenue Discussion
The company reported adjusted earnings per share of $3.55, beating the consensus mark of $2.70 by 31.5%. The reported figure rose 10.6% from the year-ago figure of $3.21 per share, driven by share repurchases, partially offset by lower net sales.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
Net sales of $4.15 billion topped the consensus mark of $4.01 billion by 3.4% but fell 4.7% on a year-over-year basis. The decline was mainly due to a weaker Single-Family market and commodity deflation, partially offset by growth from acquisitions.
Core organic sales declined 1.3% from the prior-year quarter as Single-Family decreased 3.5%, despite R&R/Other and Multi-Family’s respective growth of 4.2% and 4.3% year over year. A commodity price deflation of 5% also ailed net sales, while acquisitions contributed 1.6% favorably.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 52% of the quarterly net sales) were $2.16 billion, down 4.8% from the prior year (declined 3.4% organically). Within the segment, Manufactured products decreased 3.2% and Windows, doors & millwork fell 6.4% from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 23% of the quarterly net sales) decreased 4.1% from the year-ago quarter to $990 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25% of the quarterly net sales) decreased 5.2% year over year to $1.1 billion.
Operating Highlights
Gross margin of 35.3% expanded 120 basis points (bps) driven by productivity and Multi-Family strength, partially offset by core organic margin normalization. As a percentage of net sales, total SG&A expenses increased 150 bps to 23.5%.
Adjusted EBITDA fell 1.6% on a year-over-year basis to $685.5 million. Nonetheless, adjusted EBITDA margin increased 50 bps year over year to 16.5%, which is attributable to higher gross margin.
2023 Highlights
BLDR generated net sales of $17.1 billion, down 24.8% from 2022, due to a decline in core organic net sales of 17.3% and commodity deflation of 11.1%. Nonetheless, acquisitions contributed 3.6% to net sales.
Adjusted EPS of $14.59 decreased 22% from $18.71 reported in 2022. Gross margin of 35.2% expanded 110 bps year over year. Adjusted EBITDA decreased 33.8% to $2.9 billion and adjusted EBITDA margin contracted 230 bps from 2022 to 17%.
In 2023, BLDR delivered approximately $175 million in productivity savings related to operations excellence and supply-chain initiatives.
Financial Details
As of Dec 31, 2023, Builders FirstSource had cash and cash equivalents of $66.16 million, down from $80.45 million at 2022-end. The company had liquidity of $1.3 billion at 2023-end, including $1.27 billion in net borrowing available under the revolving credit facility.
Long-term debt — net of current portion, discounts and issuance costs — was $3.18 billion, up from $2.98 billion at 2022-end. As of Dec 31, 2023, the net debt to adjusted EBITDA ratio was 1.1x compared with 0.7x in the prior year.
Net cash from operations was $2.31 billion during the year versus $3.6 billion a year ago. Free cash flow was $1.9 billion in 2023.
BLDR repurchased 17.8 million shares of its common stock at an average price of $100.49 per share for $1.8 billion. On Feb 21, BLDR authorized the repurchase of $1 billion of its outstanding shares, inclusive of the approximately $200 million remaining in the prior share repurchase plan.
2024 Guidance
For 2024, BLDR expects net sales between $17.5 billion and $18.5 billion. Acquisitions completed within the last 12 months are projected to contribute 1-1.5% in net sales growth. Also, two additional selling days in 2024 are projected to add 0.7% to net sales growth.
Geographically, Single-Family starts are likely to be up in the mid-single digits, Multi-Family starts are expected to be down by 20-30%, and R&R is projected to be up in the low single digits.
Gross margin is likely to be in the range of 30-33%. Adjusted EBITDA is expected to be between $2.4 billion and $2.8 billion. Adjusted EBITDA margin is expected to be in the range of 14-15%. BLDR expects to deliver $90-$110 million in productivity savings in 2024.
Free cash flow is expected between $1 and $1.2 billion, assuming average commodity prices in the range of $400-$440 per thousand board feet (mbf).
The company expects interest expense in the range of $190-$200 million, an effective tax rate of 23-25%, and total capital expenditures within $400-$500 million. Depreciation and amortization expenses are estimated to be between $525 million and $575 million.
Armstrong World Industries, Inc. (AWI - Free Report) reported impressive results for fourth-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments, despite soft market conditions. The growth was attributable to the increase in average unit value, driven by favorable pricing and volumes. Also, contributions from recent acquisitions aided the uptrend. This was reflected in record-setting sales and adjusted EBITDA growth, along with adjusted EBITDA margin expansion.
Owens Corning (OC - Free Report) reported better-than-expected results for fourth-quarter 2023. Both earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
The Roofing segment’s contributions, favorable price and cost mix, and manufacturing performance aided the uptrend. The Roofing segment’s net sales rose 16% year over year to $928 million, driven by strong demand tied to the mild weather extending the roofing season in many regions and strong components attachment rate, as well as favorable mix and positive price. For the first quarter of 2024, OC expects net sales to be slightly below the first quarter of 2023 while generating mid-teens margins.
Martin Marietta Materials, Inc. (MLM - Free Report) reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. Revenues missed the consensus mark but rose year over year.
Going forward, MLM anticipates strong demand for infrastructure, large-scale energy and domestic manufacturing projects. This will largely offset weaker residential demand and the anticipated softening in light non-residential activity. With mortgage rates stabilizing and affordability headwinds receding, MLM fully expects single-family residential construction to recover as demand still exceeds supply, particularly in its key markets. For 2024, it expects consolidated products and services revenues of $6.75-$7.19 billion. Also, adjusted EBITDA is projected to be between $2.14 billion and $2.34 billion.
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Builders FirstSource (BLDR) Q4 Earnings Beat, Net Sales Miss
Builders FirstSource, Inc. (BLDR - Free Report) reported impressive earnings in fourth-quarter 2023. The bottom line surpassed the Zacks Consensus Estimate and improved from the previous year. Despite a challenging operating environment in 2023, where single-family starts witnessed significant reduction, the company delivered mid-teens or better adjusted EBITDA margin for 11 consecutive quarters.
Shares of this manufacturer and supplier of building materials gained 5.3% on Feb 22.
Net sales surpassed the consensus mark but declined year over year due to a slowdown in residential construction demand, particularly in the Single-Family market.
Earnings & Revenue Discussion
The company reported adjusted earnings per share of $3.55, beating the consensus mark of $2.70 by 31.5%. The reported figure rose 10.6% from the year-ago figure of $3.21 per share, driven by share repurchases, partially offset by lower net sales.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
Builders FirstSource, Inc. price-consensus-eps-surprise-chart | Builders FirstSource, Inc. Quote
Net sales of $4.15 billion topped the consensus mark of $4.01 billion by 3.4% but fell 4.7% on a year-over-year basis. The decline was mainly due to a weaker Single-Family market and commodity deflation, partially offset by growth from acquisitions.
Core organic sales declined 1.3% from the prior-year quarter as Single-Family decreased 3.5%, despite R&R/Other and Multi-Family’s respective growth of 4.2% and 4.3% year over year. A commodity price deflation of 5% also ailed net sales, while acquisitions contributed 1.6% favorably.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 52% of the quarterly net sales) were $2.16 billion, down 4.8% from the prior year (declined 3.4% organically). Within the segment, Manufactured products decreased 3.2% and Windows, doors & millwork fell 6.4% from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 23% of the quarterly net sales) decreased 4.1% from the year-ago quarter to $990 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25% of the quarterly net sales) decreased 5.2% year over year to $1.1 billion.
Operating Highlights
Gross margin of 35.3% expanded 120 basis points (bps) driven by productivity and Multi-Family strength, partially offset by core organic margin normalization. As a percentage of net sales, total SG&A expenses increased 150 bps to 23.5%.
Adjusted EBITDA fell 1.6% on a year-over-year basis to $685.5 million. Nonetheless, adjusted EBITDA margin increased 50 bps year over year to 16.5%, which is attributable to higher gross margin.
2023 Highlights
BLDR generated net sales of $17.1 billion, down 24.8% from 2022, due to a decline in core organic net sales of 17.3% and commodity deflation of 11.1%. Nonetheless, acquisitions contributed 3.6% to net sales.
Adjusted EPS of $14.59 decreased 22% from $18.71 reported in 2022. Gross margin of 35.2% expanded 110 bps year over year. Adjusted EBITDA decreased 33.8% to $2.9 billion and adjusted EBITDA margin contracted 230 bps from 2022 to 17%.
In 2023, BLDR delivered approximately $175 million in productivity savings related to operations excellence and supply-chain initiatives.
Financial Details
As of Dec 31, 2023, Builders FirstSource had cash and cash equivalents of $66.16 million, down from $80.45 million at 2022-end. The company had liquidity of $1.3 billion at 2023-end, including $1.27 billion in net borrowing available under the revolving credit facility.
Long-term debt — net of current portion, discounts and issuance costs — was $3.18 billion, up from $2.98 billion at 2022-end. As of Dec 31, 2023, the net debt to adjusted EBITDA ratio was 1.1x compared with 0.7x in the prior year.
Net cash from operations was $2.31 billion during the year versus $3.6 billion a year ago. Free cash flow was $1.9 billion in 2023.
BLDR repurchased 17.8 million shares of its common stock at an average price of $100.49 per share for $1.8 billion. On Feb 21, BLDR authorized the repurchase of $1 billion of its outstanding shares, inclusive of the approximately $200 million remaining in the prior share repurchase plan.
2024 Guidance
For 2024, BLDR expects net sales between $17.5 billion and $18.5 billion. Acquisitions completed within the last 12 months are projected to contribute 1-1.5% in net sales growth. Also, two additional selling days in 2024 are projected to add 0.7% to net sales growth.
Geographically, Single-Family starts are likely to be up in the mid-single digits, Multi-Family starts are expected to be down by 20-30%, and R&R is projected to be up in the low single digits.
Gross margin is likely to be in the range of 30-33%. Adjusted EBITDA is expected to be between $2.4 billion and $2.8 billion. Adjusted EBITDA margin is expected to be in the range of 14-15%. BLDR expects to deliver $90-$110 million in productivity savings in 2024.
Free cash flow is expected between $1 and $1.2 billion, assuming average commodity prices in the range of $400-$440 per thousand board feet (mbf).
The company expects interest expense in the range of $190-$200 million, an effective tax rate of 23-25%, and total capital expenditures within $400-$500 million. Depreciation and amortization expenses are estimated to be between $525 million and $575 million.
Zacks Rank & Recent Construction Releases
BLDR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Armstrong World Industries, Inc. (AWI - Free Report) reported impressive results for fourth-quarter 2023, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.
The company’s growth trend was backed by solid contributions from the Mineral Fiber as well as Architectural Specialties segments, despite soft market conditions. The growth was attributable to the increase in average unit value, driven by favorable pricing and volumes. Also, contributions from recent acquisitions aided the uptrend. This was reflected in record-setting sales and adjusted EBITDA growth, along with adjusted EBITDA margin expansion.
Owens Corning (OC - Free Report) reported better-than-expected results for fourth-quarter 2023. Both earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
The Roofing segment’s contributions, favorable price and cost mix, and manufacturing performance aided the uptrend. The Roofing segment’s net sales rose 16% year over year to $928 million, driven by strong demand tied to the mild weather extending the roofing season in many regions and strong components attachment rate, as well as favorable mix and positive price. For the first quarter of 2024, OC expects net sales to be slightly below the first quarter of 2023 while generating mid-teens margins.
Martin Marietta Materials, Inc. (MLM - Free Report) reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. Revenues missed the consensus mark but rose year over year.
Going forward, MLM anticipates strong demand for infrastructure, large-scale energy and domestic manufacturing projects. This will largely offset weaker residential demand and the anticipated softening in light non-residential activity. With mortgage rates stabilizing and affordability headwinds receding, MLM fully expects single-family residential construction to recover as demand still exceeds supply, particularly in its key markets. For 2024, it expects consolidated products and services revenues of $6.75-$7.19 billion. Also, adjusted EBITDA is projected to be between $2.14 billion and $2.34 billion.