It has been about a month since the last earnings report for Builders FirstSource (BLDR Quick QuoteBLDR - Free Report) . Shares have lost about 12.1% in that time frame, underperforming the S&P 500.

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

Builders FirstSource Up on Q4 Earnings & Revenue Beat

Builders FirstSource ended 2021 on a solid note. The company reported solid results for fourth-quarter 2021, wherein earnings and net sales surpassed the Zacks Consensus Estimate as well as increased significantly year over year. The results were driven by an increase in net sales and gross margin amid continuous raw material supply woes.

Dave Flitman, CEO of Builders FirstSource, said, “We achieved another quarter of double-digit core organic growth to conclude an outstanding year of above market performance and record results in 2021. On a pro forma basis in 2021, we delivered core organic growth of 21% and produced record sales of nearly $20 billion to deliver over $3 billion of Adjusted EBITDA and a record adjusted EBITDA margin of 15.4%. Our business is strong and we grew sales by more than 25% and adjusted EBITDA by more than 60%.”

For 2022, the company remains optimistic about its financial performance as it expects strong demand in single-family housing and across the portfolio of value-added products and solutions.

Note: Investors should note that the year-over-year comparison given below is based on a Combined Non-GAAP Pro Forma basis, unless notified.

Earnings & Revenue Discussion

The manufacturer and supplier of building materials reported adjusted earnings of $2.78 per share, which handily topped the consensus mark of $1.89 by 47.1%.

For the quarter, net sales of $4.6 billion surpassed the consensus mark of $4.3 billion by 6.5%. The top line grew 23.7% on a year-over-year basis. Core organic sales grew 11.7% from the prior-year quarter. Commodity price inflation contributed 5.3% to net sales. Acquisitions (baring BMC merger) added 6.7% to net sales growth. The upside was led by solid demand for its products amid supply woes. Core organic customer growth in Single Family increased 14.4%, while that of R&R/Other and Multi Family improved 1.2% and 6.7%, respectively.

Sales According to Product Category (assuming BMC in Q4 2021 and not in Q4 2020)

Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 45% of the quarterly net sales) were $2.08 billion, up 128.3% from the prior year.

Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 18.8% of the quarterly net sales) increased 53.3% from the year-ago quarter to $870.9 million.

Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 36.2% of the quarterly net sales) increased 60% year over year to $1.68 billion.

Operating Highlights

Gross profit for the quarter increased 52.5% year over year to $1.5 billion. Gross margin of 32.1% grew 610 basis points (bps) year over year owing to disciplined pricing in a volatile, supply-constrained marketplace and effective and timely sourcing. As a percentage of net sales, total SG&A costs grew 60 bps to 18.6% owing to the expense associated with the BMC merger and other buyouts including amortization expense of acquired intangibles and one-time charges. Adjusted EBITDA increased 110% on a year-over-year basis to $793.4 million, primarily driven by solid demand across key customer end markets, commodity inflation and pricing. Adjusted EBITDA margin expanded 700 bps year over year to 17.1%.

Full-Year 2021 Highlights

Adjusted earnings came in at $10.32 per share for 2021 versus $2.79 in 2020. Net sales were $19.9 billion in 2021, up 55.8% from the 2020 pro-forma level. Adjusted EBITDA grew 185.5% year over year to $3.1 billion, given higher demand across single-family home growth, commodity inflation, pricing and cost leverage. Adjusted EBITDA margin expanded 700 bps to 15.4%.

Other Financial Details

As of Dec 31, 2021, Builders FirstSource had cash and cash equivalents of $42.6 million compared with $423.8 million at 2020-end. Borrowing availability under the revolving credit facility was $0.7 billion at 2021-end. Long-term debt — net of current portion — was $2.93 billion, up from $1.6 billion at 2020-end.

Buyouts

On Dec 31, 2021, BECN wrapped up the acquisition of National Lumber, the largest independent building materials supplier in New England. On Dec 7, 2021, Builders FirstSource acquired a manufacturer of roof and floor trusses in Western Michigan — Truss Technologies — for approximately $30 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 84.59% due to these changes.

VGM Scores

Currently, Builders FirstSource has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Builders FirstSource has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.