A month has gone by since the last earnings report for Gibraltar Industries (ROCK - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Gibraltar Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Gibraltar's Q3 Earnings Beat Estimates, Revenues Miss
Gibraltar Industries, Inc. reported mixed results in third-quarter 2018, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. The company’s earnings of 71 cents surpassed the consensus mark of 70 cents by 1.4%. Also, the reported figure increased 6% year over year on the back of robust performance by the Renewable Energy & Conservation segment, along with effective price-material cost management. Additionally, the company’s solid execution of 80/20 simplification initiatives and improved mix of higher-margin innovative products supported the upside.
However, net sales of $280.1 million missed the consensus mark of $287 million in the reported quarter. Nevertheless, the reported figure increased 2% year over year, supported by strong growth of its Renewable Energy & Conservation segment and improved mix of higher-margin innovative products. The positives results were partially offset by lower demand in the Infrastructure segment.
Revenues of the Residential Products segment came in at $125.8 million in the reported quarter, down 2.9% year over year. Segmental sales mainly decreased due to softness in roofing activity, along with commercial and multi-family construction markets. Adjusted operating margins contracted 160 basis points (bps). Unfavorable product mix and lower volume added to the woes.
Quarterly sales at the Industrial and Infrastructure Products segment declined 1.9% to $55.8 million year over year. The decrease was due to softer demand in the Infrastructure business. However, adjusted operating margins expanded 330 bps in the reported quarter, backed by its solid execution of 80/20 simplification initiatives and improved mix of higher-margin innovative products.
Renewable Energy and Conservation segment’s sales were up 11.8% year over year to $98.5 million in the quarter, driven by strong demand in both Gibraltar’s domestic renewable energy and conservation markets, as well as for innovative products. Also, operating margins grew 150 bps to 15.1%.
Costs and Margins
Cost of sales in the third quarter was $209.8 million, up 1.9% year over year. Gross profit margin in the quarter came in at 25.1%, up 10 bps year over year.
Selling, general and administrative expenses came in at $40.9 million compared with $33 million a year ago. Adjusted operating margin in the quarter was 12.1%, down 130 bps year over year.
Balance Sheet and Cash Flow
As on Sep 30, 2018, Gibraltar had cash and cash equivalents worth $245.4 million compared with $222.3 million recorded on Dec 31, 2017. Long-term debt came in at $209.8 million, marginally up from $209.6 recorded at the end of 2017.
In the first nine months of 2018, the company provided $38.2 million cash by operating activities compared with $48.8 million in the year-ago period.
Gibraltar expects stronger demand for innovative products, and growth in the Renewable Energy & Conservation business to boost the top line in the upcoming quarters. The company intends to gain efficiency on the back of strategic acquisitions and the implementation of 80/20 simplification projects.
For 2018, Gibraltar expects consolidated revenues to be more than $1 billion. However, it has lowered its revenue growth expectation to 1-2% from prior guided range of 2-4%, considering the current end market activity levels. Gibraltar has narrowed its adjusted earnings projection to $2.03-$2.08 per share (versus $1.96-$2.08 expected earlier).
Adjusted operating income is expected in the range of $100-$102 million, lower than the previous guided range of $103-$109 million. Adjusted operating margin are now expected to bein the range of 10.1-10.2% (versus 10.2-10.6% expected earlier).
For the fourth quarter of 2018, the company anticipates to generate revenues in the range of $239-$249 million. Also, adjusted earnings are projected at 35-40 cents per share.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
Currently, Gibraltar Industries has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Gibraltar Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.