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Foundation Building Materials (FBM) Q1 Earnings Top Estimates

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Foundation Building Materials, Inc. (FBM - Free Report) reported better-than-expected results in first-quarter 2020. The company’s earnings and sales not only topped analysts’ expectations but also improved year over year, courtesy of improved margins on the back of pricing and purchasing initiatives.

Inside the Headlines

Foundation Building Materials reported adjusted earnings of 22 cents per share, which topped the Zacks Consensus Estimate of 12 cents by a whopping 83.3%. The bottom line also increased an impressive 57.1% year over year. The upside was led by improved profitability across its wallboard, metal framing, and complementary and other products lines driven by pricing and purchasing initiatives.

Net sales were $524.3 million in the quarter, which improved 1.8% year over year and surpassed the consensus mark by 0.5%. Average daily net sales were up 0.2% in the quarter.

Net sales from base business branches decreased $1.5 million, while average daily base business net sales decreased 1.9% from the year-ago period. The downside was mainly due to the impacts and disruptions caused by the COVID-19 outbreak.

Acquired and existing branches that were strategically combined contributed $10.9 million to net sales, which grew 54.8% year over year in the quarter.

Margins

Gross margin grew 120 basis points (bps) year over year to 30.9%, owing to higher profitability across its wallboard, metal framing, and complementary and other products lines. Selling, general and administrative expenses — as a percentage of net sales — increased 70 bps due to loss of sales leverage resulting from the COVID-19 pandemic, continued investment in various company-wide initiatives, as well as higher labor costs.

Adjusted EBITDA margin was 7.7% in the quarter, up 40 bps year over year.

Acquisition

On Feb 3, 2020, Foundation Building Materials acquired the operations of two branches and certain assets of Insulation Distributors, Inc. (IDI). This enabled the company to add two specialty building product branches in Maryland. For 2020, the former IDI branches are expected to contribute $16-$18 million to net sales.

It has temporarily suspended acquisition activity and withdrawn its guidance for 2020 due to the COVID-19 pandemic.

Balance Sheet & Cash Flow

As of Mar 31, 2020, Foundation Building Materials had cash and cash equivalents of $141.2 million compared with $17.8 million at 2019-end. Long-term debt — net of current portion — was $433.8 million on Mar 31, 2020 compared with $434.6 million at 2019-end.

Cash provided by operating activities from continuing operations was $47.7 million in the quarter, up from $17.7 million in the year-ago period.

Zacks Rank & Peer Releases

Currently, Foundation Building Materials currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens Corning (OC - Free Report) reported impressive earnings in first-quarter 2020. The bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.

United Rentals, Inc. (URI - Free Report) reported impressive results in first-quarter 2020. Earnings and revenues topped the respective Zacks Consensus Estimate, and grew on a year-over-year basis.

Masco Corporation’s (MAS - Free Report) first-quarter 2020 earnings and revenues handily beat the Zacks Consensus Estimate and improved year over year.

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