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Gibraltar Industries (ROCK) Down 12% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Gibraltar Industries (ROCK - Free Report) . Shares have lost about 12% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Gibraltar Q4 Earnings Beat Estimate

Gibraltar Industries reported fourth-quarter 2019 results. The company’s earnings and sales not only topped analysts’ expectations but also rose year over year on solid contribution from the Renewable Energy and Conservation segment.

The company’s adjusted earnings of 62 cents per share beat the Zacks Consensus Estimate of 59 cents by 5.1%. The bottom line also increased 31.9% year over year on higher organic growth in Renewable Energy & Conservation, lower interest expense, and benefits from operational excellence initiatives.

Net sales of $258.1 million beat the consensus mark of $256 million by 0.8%. On a year-over-year basis, the top line increased 7.1%, out of which 5.3% was organic, led by the Renewables & Conservation business. Meanwhile, the acquisition of Apeks Supercritical contributed 1.8% to revenue growth.

Markedly, the company’s backlog was $218 million (as of Dec 31, 2019), up 35% year over year, as it increased participation in Renewable Energy and Conservation, as well as Infrastructure and Residential end markets.

Segmental Details

Residential Products: Net sales in the segment declined 1.1% year over year to $101.2 million during the quarter. A modest increase in volumes was partly offset by market price.

Adjusted operating margins contracted 30 basis points (bps) to 13.1%. The downside was mainly caused by unfavorable product mix, which was offset by improved material cost alignment and 80/20 simplification initiatives.

Industrial and Infrastructure Products: Sales in the segment decreased 9.9% year over year to $45.5 million. The drop was due to lower pricing and demand for core Industrial products. Notably, customers delayed purchases to optimize their inventory in a declining steel price environment.

Adjusted operating margins expanded 30 bps to 7%, backed by a more favorable mix of higher margin products and solid execution of 80/20 profit improvement efforts.

Renewable Energy and Conservation: Quarterly net sales in the segment rose 26.4% year over year (21.4% on an organic basis) to $111.4 million. The Apeks Supercritical acquisition contributed 5% to top-line growth. The uptick can be attributed to solid demand for its commercial greenhouse growing solutions, including design, structures system integration, field project management and general contracting services. Meanwhile, segment backlog grew 51% year over year owing to healthy market dynamics.

Adjusted operating margins of 15.2% were up 360 bps on better operating execution, volume leverage, and favorable product and vertical market mix.

Costs and Margins

Selling, general and administrative expenses increased 25.1% year over year to $45.2 million. As a percentage of sales, the metric increased 230 bps year over year. Adjusted operating income grew 25.1% in the quarter and margin of 10.2% expanded 150 bps year over year.

Balance Sheet and Cash Flow

As of Dec 31, 2019, Gibraltar had cash and cash equivalents worth $191.4 million compared with $297 million at the end of 2018.

In 2019, the company provided $129.9 million cash from operating activities compared with $97.5 million in the year-ago period.

2019 Highlights

Adjusted earnings of $2.58 per share advanced 20.6% from $2.14 earned in 2018. Revenues of 1.05 billion grew 4.5% from a year ago, buoyed by higher contribution from the Renewable Energy & Conservation segment. Adjusted operating margin also grew 40 bps to 10.5% in the year.

2020 Guidance

Gibraltar expects consolidated revenues in the range of $1,210-$1,230 million. The company projects adjusted earnings in the range of $2.95-$3.12 per share. Adjusted operating income is expected in the range of $133-$141 million. Adjusted operating margin is expected in the range of 11-11.4%.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months. The consensus estimate has shifted 7.35% due to these changes.

VGM Scores

Currently, Gibraltar Industries has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Gibraltar Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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