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Beacon Roofing Supply, Inc. (BECN - Free Report) reported record adjusted earnings (excluding the impact of non-recurring RSG acquisition-related cost) of 88 cents per share for fourth-quarter fiscal 2016, falling short of the Zacks Consensus Estimate of 91 cents. However, earnings increased 17% on a year-over-year basis. Strong volume growth within residential roofing and a significant improvement in gross margins were partially offset by declining organic sales of other two product lines.

Including acquisition-related items, the company reported a profit of 78 cents per share in the quarter compared with 61 cents in the prior-year quarter.

Operational Update

This distributor of residential and non-residential roofing materials posted record sales of $1.17 billion, indicating a 49% year-over-year surge. However, revenues missed the Zacks Consensus Estimate of $1.27 billion.

Year-over-year sales growth was led by contributions from all product lines of the company. Residential roofing product sales soared 63%, while non-residential roofing product sales gained 29.7%. Complementary product sales were up 47.8%. Organic sales increased 2.4% for the quarter.

Cost of goods sold increased 46% to $872 million. Gross profit was $302 million, up 58% from $192 million in the year-ago quarter. Gross margin expanded 140 basis points (bps) to 25.7%.

Operating expenses for the quarter improved 56% year over year to $206 million. Operating income in the quarter was $95.9 million, compared to $59 million in the prior-year quarter.

Fiscal 2016 Performance

Beacon Roofing Supply reported adjusted earnings of $2.10 per share for fiscal 2016 posted a 52% surge year over year. Earnings missed the Zacks Consensus Estimate of $2.13 but came within the management guidance range of $2.05–$2.15. Including onetime items, earnings in the fiscal was at $1.49 compared with $1.24 in the prior fiscal. Revenues increased 64% year over year to a record $4.127 billion. However, it fell short of the Zacks Consensus Estimate of $4.22 billion as well as the guidance of $4.2–$4.3 billion.

BEACON ROOFING Price, Consensus and EPS Surprise

BEACON ROOFING Price, Consensus and EPS Surprise | BEACON ROOFING Quote


Beacon Roofing reported cash and cash equivalents of $31.4 million as of Sep 30, 2016, compared with $45.7 million as of Sep 30, 2015. The company generated $120.6 million in cash from operating activities for fiscal 2016 compared with $109 million in the prior fiscal. Beacon Roofing made eight acquisitions during 2016, increasing the current branch count to 369.

2017 Outlook

For fiscal 2017, the company provided an initial total revenue growth range of 3% to 7% for 2017, which assumes 2% to 5% organic and an approximate $75 million contribution from the seven transactions completed in 2016. The company anticipates adjusted earnings per share to range between $2.26 and $2.65. EBITDA is projected to come in the range of $365 million to $395 million, a year-over-year improvement of 5% to 15%. EBITDA margins will range between 8.6% and 8.9%.

Zacks Rank

Beacon Roofing currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the sector include Best Buy Co., Inc. (BBY - Free Report) , America's Car-Mart Inc. (CRMT - Free Report) and Insight Enterprises Inc. (NSIT - Free Report) . Best Buy witnessed a 7% increase in earnings estimates in the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

America's Car-Mart also sports a Zacks Rank #1 and its earnings estimates have gone up 1% in the last 30 days. Insight Enterprises, another Zacks Rank #1 stock, has seen earnings estimates move north by 2%.

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