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TopBuild (BLD) Down 9.9% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for TopBuild (BLD - 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 TopBuild 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.
TopBuild Corp. reported stellar results for second-quarter 2022. Its earnings and revenues surpassed their respective Zacks Consensus Estimate and improved majorly on a year-over-year basis. Strong demand, coupled with its ongoing focus on managing price, achieving operational efficiency improvements, and leveraging fixed costs, drove the results.
Robert Buck, president & CEO of TopBuild, stated, “Our unique business model combining both installation and specialty distribution, a key differentiator and critical component of our success, should enable us to outperform in any environment. We also continue to make great progress in the integration of DI and are ahead of schedule to achieve the $35 million to $40 million of synergies forecasted when we announced this transaction.”
Inside the Headlines
The company’s adjusted earnings of $4.43 per share topped the consensus estimate of $3.77 by 17.5% and grew a whopping 60.5% from the prior year’s figure.
Total net sales of $1.27 billion beat the consensus mark of $1.19 billion by 7% and increased 52.7% (20.7% on a same-branch basis) year over year. The growth was backed by solid contributions from acquisitions (32%), prices (15.2%) and volume (5.6%). Sales for the quarter benefited from strong growth in both residential and commercial businesses.
Segmental Performance
Installation (TruTeam) sales increased 23.7% year over year to $749 million. Acquisitions, volume and selling price added 2%, 8.3% and 13.3% to sales, respectively. The adjusted operating margin for the quarter expanded 210 basis points (bps) to 18.7%. Adjusted EBITDA margin also improved 170 bps to 20.8% for the quarter.
Revenues of the Specialty Distribution (Service Partners) segment grew 115% year over year to $587.8 million, driven by 20% growth in price and 94.7% from acquisitions. Volumes inched up 0.3% year over year. Adjusted operating margin declined 90 bps from the year-ago quarter’s level to 14.8%. Nonetheless, the adjusted EBITDA margin improved 70 bps to 17.2% for the quarter.
Operating Highlights
The adjusted gross margin of 30.1% expanded to 90 bps. SG&A expenses, as a percentage of revenues, rose 20 bps to 13.8%. Adjusted operating margin expanded 80 bps from the year-ago period’s levels to 16.4%.
Adjusted EBITDA increased 61.7% from the year-ago quarter’s levels to $242.3 million. Adjusted EBITDA margin also improved 100 bps to 19% in the quarter.
Financial Update
At June end, cash and cash equivalents were $123.9 million, down from $139.8 million at 2021-end. Long-term debt was $1.44 billion, down from $1.45 billion at the 2021-end. For the first six months, net cash provided by operating activities was $217.7 million compared with $202.2 million in the year-ago period.
At June end, BLD repurchased 647,466 shares.
2022 View Raised
TopBuild expects sales between $4.80 billion and $4.90 billion versus $4.65-$4.80 billion expected earlier. The estimated figure indicates an increase from $3.49 billion. Adjusted EBITDA is projected within $860-$900 million compared with $810-$860 million projected earlier. This suggests growth from $605.9 million reported in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, TopBuild has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, TopBuild has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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TopBuild (BLD) Down 9.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for TopBuild (BLD - 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 TopBuild 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.
TopBuild's (BLD - Free Report) Q2 Earnings & Sales Beat Estimates
TopBuild Corp. reported stellar results for second-quarter 2022. Its earnings and revenues surpassed their respective Zacks Consensus Estimate and improved majorly on a year-over-year basis. Strong demand, coupled with its ongoing focus on managing price, achieving operational efficiency improvements, and leveraging fixed costs, drove the results.
Robert Buck, president & CEO of TopBuild, stated, “Our unique business model combining both installation and specialty distribution, a key differentiator and critical component of our success, should enable us to outperform in any environment. We also continue to make great progress in the integration of DI and are ahead of schedule to achieve the $35 million to $40 million of synergies forecasted when we announced this transaction.”
Inside the Headlines
The company’s adjusted earnings of $4.43 per share topped the consensus estimate of $3.77 by 17.5% and grew a whopping 60.5% from the prior year’s figure.
Total net sales of $1.27 billion beat the consensus mark of $1.19 billion by 7% and increased 52.7% (20.7% on a same-branch basis) year over year. The growth was backed by solid contributions from acquisitions (32%), prices (15.2%) and volume (5.6%). Sales for the quarter benefited from strong growth in both residential and commercial businesses.
Segmental Performance
Installation (TruTeam) sales increased 23.7% year over year to $749 million. Acquisitions, volume and selling price added 2%, 8.3% and 13.3% to sales, respectively. The adjusted operating margin for the quarter expanded 210 basis points (bps) to 18.7%. Adjusted EBITDA margin also improved 170 bps to 20.8% for the quarter.
Revenues of the Specialty Distribution (Service Partners) segment grew 115% year over year to $587.8 million, driven by 20% growth in price and 94.7% from acquisitions. Volumes inched up 0.3% year over year. Adjusted operating margin declined 90 bps from the year-ago quarter’s level to 14.8%. Nonetheless, the adjusted EBITDA margin improved 70 bps to 17.2% for the quarter.
Operating Highlights
The adjusted gross margin of 30.1% expanded to 90 bps. SG&A expenses, as a percentage of revenues, rose 20 bps to 13.8%. Adjusted operating margin expanded 80 bps from the year-ago period’s levels to 16.4%.
Adjusted EBITDA increased 61.7% from the year-ago quarter’s levels to $242.3 million. Adjusted EBITDA margin also improved 100 bps to 19% in the quarter.
Financial Update
At June end, cash and cash equivalents were $123.9 million, down from $139.8 million at 2021-end. Long-term debt was $1.44 billion, down from $1.45 billion at the 2021-end. For the first six months, net cash provided by operating activities was $217.7 million compared with $202.2 million in the year-ago period.
At June end, BLD repurchased 647,466 shares.
2022 View Raised
TopBuild expects sales between $4.80 billion and $4.90 billion versus $4.65-$4.80 billion expected earlier. The estimated figure indicates an increase from $3.49 billion. Adjusted EBITDA is projected within $860-$900 million compared with $810-$860 million projected earlier. This suggests growth from $605.9 million reported in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, TopBuild has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, TopBuild has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.