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Why Is Gibraltar (ROCK) Down 16.2% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Gibraltar Industries, Inc. (ROCK - Free Report) . Shares have lost about 16.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Gibraltar Meets Q1 Earnings, Trims 2017 Guidance

Gibraltar Industries reported in-line earnings in first-quarter 2017.

Quarterly adjusted earnings of $0.20 came in line with the Zacks Consensus Estimate. However, the bottom line fell short of the year-ago tally of $0.32 per share. The company stated that unfavorable raw material pricing adversely affected its bottom-line results in the quarter.

Net sales in the quarter came in at $206.6 million, missing the Zacks Consensus Estimate of $213 million. The top line also came lower than the year-ago tally of $237.7 million. The company believes that this tepid top-line performance in the quarter was witnessed due to the ongoing proactive portfolio management activities.

Segmental Details

Revenues of Residential Products segment were $105 million during the quarter, up 5% year over year. This upside was stemmed by gradual improvement of the residential housing market, as well as increased sales of the company’s centralized mail and Express Locker solutions.

Quarterly sales of Industrial and Infrastructure Products segment came in at $50 million, down 37% year over year. The downside was witnessed due to the divestiture of the company’s U.S. bar grating product line and European industrial operations. Notably, lower volume of infrastructure business also weighed over the segment’s revenues.

Renewable Energy and Conservation segment’s sales dipped 10% year over year to $52 million in the quarter due to poor backlog.

Costs and Margins: Cost of sales in the first quarter was $157.4 million, down 14.3% year over year. Gross profit margin in the reported quarter was 23.8%, up 100 basis points (bps) year over year.  

Selling, general and administrative expenses came in at $39.6 million compared to $36.4 million recorded in the year-ago period. Interest expenses were down 3.1% year over year.

However, adjusted operating margin in the reported quarter came in at 6.4%, down 180 bps year over year.

Balance Sheet and Cash Flow: Exiting first-quarter 2017, Gibraltar Industries had cash and cash equivalents worth $160.9 million compared to $170.2 million recorded on Dec 31, 2016. Long-term debt came in at $209.4 million, as against $209.2 million recorded at the end of 2016.

In the first quarter, the company generated cash worth $2.3 million from operating activities, as against $15.5 million generated in the prior-year quarter. Capital expenditures came in at $1.5 million, down 3.2% year over year.

Outlook: Gibraltar Industries believes that the dreary industrial and infrastructure market conditions and input prices would likely recover in the second half of 2017. The company noted that markets are rebounding, though not in the anticipated pace. On account of this, Gibraltar Industries trimmed its full-year 2017 guidance. Adjusted earnings for 2017 are now anticipated to lie within the $1.57–$1.70 per share range, lower than the previous guidance of $1.75–$1.85 per share. For full-year 2017, the company anticipates to generate revenues in the band of $970–$980 million, down 2–3% year over year.

Second-quarter 2017 revenues and earnings are projected to lie in the band of $249–$254 million and $0.37–$0.42 per share, respectively.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Gibraltar's stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is more suitable for value investors than growth investors.

Outlook

The stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.


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