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Beacon Roofing (BECN) Q4 Earnings Lag Estimates, Shares Down

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Beacon Roofing Supply, Inc.’s (BECN - Free Report) shares fell 4.6% in the after-hour trading session, following its fourth-quarter fiscal 2019 earnings release. The company reported lower-than-expected earnings and net sales during the quarter. Also, its bottom line declined from the prior-year period due to higher product and acquisition-related costs.

Beacon Roofing reported adjusted earnings of $1.04 per share, missing the Zacks Consensus Estimate of $1.17 by 11.1%. The reported figure declined 2.8% from $1.07 per share a year ago.

Net sales of $2.03 billion lagged the consensus mark of $2.06 billion by 1.4%. Nonetheless, the said figure grew 4.9% year over year. The improvement was backed by 3.2% organic sales improvement, driven by residential roofing organic growth of 11.5%.

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Segment & Operating Details

Sales in the Residential roofing product segment (accounting for 44.9% of total net sales) increased 12.7% to $912.2 million and that of Non-residential roofing product unit (24.9%) was up 2.4% from a year ago to $505.2 million. However, Complementary products’ (30.2%) sales were down 3.2% year over year to $612.6 million.

Existing market sales increased 4.8% from the prior-year quarter, attributed to 13.2% growth in residential roofing. Also, the metric climbed 3.2% year over year on the basis of business day.

Cost of goods sold (accounting for 75.7% of net sales) totaled $1,536.5 million, increasing 1.1% year over year. Gross margin contracted 110 basis points (bps) to 24.3%.

Operating expenses remained on par with the prior-year figure. However, operating income fell 110 bps. Adjusted EBITDA margin contracted 90 bps to 8.3%.

Cash Position

As of Sep 30, 2019, Beacon Roofing had cash and cash equivalents of $72.3 million, down from $129.9 million at 2018-end. Cash provided by operations was $212.7 million compared with $539.4 million reported a year ago.

Fiscal 2019 Highlights

Beacon Roofing’s adjusted earnings of $2.26 per share increased 16.3% year over year and surpassed analysts’ expectation by 2.7%. Also, revenues of $7.11 billion in fiscal 2019 were up 10.7% year over year. However, net sales lagged the consensus mark by 0.5%.

Adjusted EBITDA margin in fiscal 2019 contracted 80 bps from a year ago.

Zacks Rank and Stocks to Consider

Beacon Roofing currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same industry include BMC Stock Holdings, Inc. (BMCH - Free Report) , Builders FirstSource, Inc. (BLDR - Free Report) and GMS Inc. (GMS - Free Report) . While BMC Stock sports a Zacks Rank #1 (Strong Buy), Builders FirstSource and GMS carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BMC Stock and Builders FirstSource surpassed the consensus mark in each of the trailing four quarters, with the average being 29.3% and 28.2%, respectively.

GMS's EPS growth rate for the current year is expected to be 11.1%.

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