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Gibraltar Industries (ROCK) Down 9.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Gibraltar Industries (ROCK - Free Report) . Shares have lost about 9.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Gibraltar Industries 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 drivers.

Gibraltar's (ROCK - Free Report) Q1 Earnings Lag Estimates, Up Y/Y

Gibraltar Industries, Inc. reported mixed first-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate, while revenues beat the same.

Gibraltar reported adjusted earnings of 28 cents, missing the consensus estimate of 32 cents by 12.5%. However, the reported figure increased 7.7% year over year on the back of robust performance from the Industrial and Infrastructure segment, interest savings on loan repayment, and enduring benefits from 80/20 simplification initiatives.

The company’s net sales during the reported quarter came in at $227.4 million, exceeding analysts’ expectation of $223 million and improving 5.6% on a year-over-year basis. The improvement was mainly backed by increased demand for innovative products in Industrial and Infrastructure, and Renewable Energy and Conservation segments, along with improved activity in the Infrastructure business.

Segmental Details

Residential Products segment’s net sales totaled $103.7 million during the quarter, down 0.2% year over year. Segment sales decreased mainly due to lower demand for building products, caused by unfavorable weather conditions and volume declines owing to selling price increases. Adjusted operating margins also contracted 80 basis points (bps).

Net sales in the Industrial and Infrastructure Products segment grew 0.9% year over year to $54.9 million. The upside was driven by increased activity in the Infrastructure unit and continued demand for innovative products, partially offset by lower volumes in the Industrial business for more commoditized products.

Notably, adjusted operating margins in the segment expanded 360 bps to 7.5%, backed by favorable product mix, higher volume leverage in the Infrastructure business, and continued benefit from 80/20 simplification initiatives.

Quarterly net sales at the Renewable Energy and Conservation segment rose 20.7% year over year to $68.8 million. The improved results were attributable to strong demand for its innovative tracker solution and solid contribution from SolarBOS. However, operating margins decreased 520 bps to 2.5% due to additional costs incurred for the recently launched tracker solution for improving durability and performance.

Costs and Margins

Cost of sales in the quarter was $183.5 million, increasing 9.9% year over year. Gross margin came in at 19.3%, down 310 bps year over year.

Selling, general and administrative expenses grew 3.3% year over year to $33.3 million. Adjusted operating margin of 5.8% contacted 60 bps year over year.

Balance Sheet and Cash Flow

As of Mar 31, 2019, Gibraltar had cash and cash equivalents worth $43.5 million compared with $297 million recorded at the end of 2018. Long-term debt was $1.6 million, in line with the 2018-end figure.

In the first three months of 2019, the company used $37.5 million cash from operating activities compared with $22.2 million a year ago.

Guidance

Gibraltar remains confident about end-markets served across the business. The company intends to gain efficiency on the back of innovative product development, strategic acquisitions and the implementation of 80/20 simplification projects.

For 2019, Gibraltar expects consolidated revenues to be more than $1 billion. The company projects adjusted earnings in the range of $2.40-$2.55 per share. Adjusted operating income is expected in the range of $110-$117 million. Adjusted operating margin is expected in the range of 10.6-11.1%.

For second-quarter 2019, the company anticipates to generate revenues in the range of $268-$274 million. Also, adjusted earnings are projected within 72-77 cents per share, indicating an improvement from 71 cents reported in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Gibraltar Industries has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Gibraltar Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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