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TopBuild (BLD) Q1 Earnings Top, Net Sales Miss, View Up

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TopBuild Corp. (BLD - Free Report) reported mixed results for first-quarter 2024, wherein its earnings topped the Zacks Consensus Estimate but revenues missed the same.

Nonetheless, both earnings and net sales grew on a year-over-year basis. Notably, effective price realization during the quarter, combined with productivity initiatives, resulted in a 100 basis points (bps) expansion of the adjusted EBITDA margin.

Also, the company has revised its forecast for 2024 upward, considering the robust profitability observed in the first quarter and the integration of acquisitions completed so far in 2024.

Meanwhile, TopBuild declared that its board of directors had approved the repurchase of up to $1 billion of the company's outstanding common stock. This new authorization supplements the $154 million remaining from the previous approval, resulting in a total availability of $1.15 billion for share repurchases.

Shares of TopBuild lost 5% during the trading session on May 7 but gained 1.2% in the after-hour trading session on the same day.

TopBuild Corp. Price, Consensus and EPS Surprise

TopBuild Corp. Price, Consensus and EPS Surprise

TopBuild Corp. price-consensus-eps-surprise-chart | TopBuild Corp. Quote

Inside the Headlines

The company’s adjusted earnings per share of $4.81 topped the consensus estimate of $4.56 by 5.5%. The bottom line increased 10.3% from the prior year’s $4.36.
Total net sales of $1.28 billion missed the consensus mark of $1.31 billion by 2.1% but increased 1.1% year over year. In the first quarter, its single-family installation business showed sequential improvement on a branch-to-branch comparison each month. Notably, March marked the first instance in a year where single-family installations exhibited year-over-year growth, which represents a highly positive development.

Segmental Performance

Installation sales increased 4.1% year over year to $798.7 million. Acquisitions and selling prices contributed 3.5% and 1.2% to sales, respectively. Volumes also contributed to sales by 0.3% year over year. Our model suggested the segment’s net sales to grow 4.8% to $803.7 million.

Growth was driven by the strength in the multi-family sector during the quarter, which grew more than 20% versus a tough comp from the prior year.

Adjusted operating margin for the quarter expanded 40 bps to 19.6%. Adjusted EBITDA margin improved 60 bps to 22% for the quarter.

Revenues of the Specialty Distribution segment declined 2.3% year over year to $545.8 million. Volumes reduced sales by 4.2% year over year. However, pricing and acquisitions contributed 1.5% and 0.4% to sales growth, respectively. We expected segmental net sales to be almost in line with the year-ago figure. The decrease in volume was primarily driven by reduced sales of residential insulation, attributed to changes in the business mix and constrained material supply of fiberglass.

Adjusted operating margin rose 90 bps from the year-ago level to 14.1%. Adjusted EBITDA margin also improved 110 bps to 16.9% for the quarter.

Operating Highlights

Adjusted gross margin of 30.3% expanded 110 bps, given improved productivity and higher pricing in both segments.

Adjusted SG&A expenses, as a percentage of revenues, grew 30 bps year over year at 13.5%.
Nonetheless, the adjusted operating margin expanded 70 bps from the year-ago period to 16.8%. We anticipated the metric to be 16% for the reported quarter.

Adjusted EBITDA grew 6.5% from the year-ago quarter to $253.8 million.

Adjusted EBITDA margin improved 100 bps to 19.8% for the quarter. The Zacks model suggested the metric to be 18.8% for the first quarter.

Financial Update

As of Mar 31, 2024, cash and cash equivalents were $968.8 million, up from $848.6 million at 2023-end. Long-term debt was $1.36 billion, down from $1.37 billion at 2023-end.

For the first quarter, net cash provided by operating activities was $178.8 million, up from $169.8 million in the year-ago period.

2024 Guidance

TopBuild now expects net sales between $5.4 billion and $5.6 billion versus earlier expectations of $5.360-$5.560 billion. The estimated figure indicates an increase from $5.19 billion reported in 2023.

Adjusted EBITDA is now projected to be between $1.065 billion and $1.155 billion versus $1.04 billion-$1.13 billion of prior projection. This suggests growth (considering the midpoint of the guided range) from $1.05 billion reported in 2023.

Zacks Rank & Recent Construction Releases

BLD currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens Corning (OC - Free Report) reported impressive results in first-quarter 2024, with earnings and net sales surpassing the Zacks Consensus Estimate. Earnings increased on a year-over-year basis despite a net sales decline. Sales declined due to lower sales volumes in the Insulation and Composites segments.

For the second quarter of 2024, Owens Corning expects net sales to be in line with the second quarter of 2023 while generating approximately 20% EBIT margins.

Masco Corporation (MAS - Free Report) reported mixed results for first-quarter 2024, wherein earnings surpassed the Zacks Consensus Estimate, but net sales lagged the same. On a year-over-year basis earnings increased despite net sales decline.

Strong operational efficiency helped Masco deliver solid earnings. Masco’s focus on a balanced capital deployment strategy helped it return $212 million to shareholders via dividends and share repurchases.

Watsco, Inc. (WSO - Free Report) reported tepid first-quarter 2024 results, with earnings and revenues lagging the Zacks Consensus Estimate. On a year-over-year basis, the top line grew while the bottom line dwindled.

Watsco’s first-quarter results reflect a seasonal sales trend, wherein the sales of HVAC equipment and other HVAC products declined year over year. Furthermore, high costs and expenses impacted the bottom line of the company. This was partially offset by increased sales volume for commercial refrigeration products.

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