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Builders FirstSource (BLDR) Up 0.8% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Builders FirstSource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Builders FirstSource’s Q4 Earnings Beat, Margins Down
Builders FirstSource reported fourth-quarter 2022 earnings surpassed the Zacks Consensus Estimate and increased strongly year over year. Net sales surpassed the consensus mark but declined year over year.
The result was hampered by declining single-family starts, two fewer selling days and commodity deflation, partially offset by growth from acquisitions.
Dave Rush, CEO of Builders FirstSource, said, “Our continuing focus on growing value-added products and operational excellence helped us to produce record full-year 2022 Adjusted EBITDA of $4.4 billion. While economic conditions have become more complex in recent months, I am confident that our exceptional geographic and end-market exposure as well as our experienced management team will lead us to achieve our strategic growth priorities.”
He added, “As we move into 2023, we will maintain our disciplined approach to capital deployment to ensure that we can continue to drive long-term value creation for our shareholders.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $3.21 per share, which handily topped the consensus mark of $2.37 by 35.4%. The reported figure also increased by 15.5% from the year-ago quarter.
Net sales of $4.36 billion surpassed the consensus mark of $4.23 billion by 2.8% but fell 6% on a year-over-year basis. Core organic sales also declined 7.7% from the prior-year quarter. A commodity price deflation of 3% of net sales and a decline of 3.2% due to two fewer selling days were partially offset by acquisitions contribution of 7.9%. Core organic sales in value-added products inched up 0.6% compared with the prior-year period.
Core organic growth in Single Family decreased by 13.9%, while R&R/Other and Multi-Family grew 14.9% and 15.1% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 52.3% of the quarterly net sales) were $2.28 billion, up 8.3% from the prior year. Within the segment, Manufactured products totaled $1.15 billion and Windows, doors & millwork stood at $1.13 billion compared with $1.18 billion and $924.9 million, respectively, a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 22.5% of the quarterly net sales) increased 15.5% from the year-ago quarter to $980.5 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.2% of the quarterly net sales) decreased 34.7% year over year to $1.1 billion.
Operating Highlights
Gross profit of $1.5 billion was flat year over year, but gross margin of 34.1% expanded 200 basis points (bps) on increased value-added product category mix. As a percentage of net sales, total SG&A expenses increased 340 bps to 22%.
Adjusted EBITDA fell 12.2% on a year-over-year basis to $0.7 billion. Adjusted EBITDA margin also contracted by 110 bps year over year to 16%.
2022 Highlights
In 2022, BLDR generated net sales of $22.7 billion, up 14.2% from the previous year. Of this growth, acquisitions contributed 1.1%, core organic sales supported 6.6% and commodity inflation added 1.1%. This was partially offset by two fewer selling days that impacted sales by 0.8%.
Adjusted earnings of $18.71 per share increased from $10.32 reported in 2021. The 45.7% improvement was backed by net sales growth, a higher mix of sales from value-added product categories and disciplined pricing, partially offset by higher income tax and SG&A expense.
Adjusted EBITDA margin rose 390 bps from the prior-year period to 19.3%.
Financial Details
As of Dec 31, 2022, Builders FirstSource had cash and cash equivalents of $80.4 million compared with $42.6 million at 2021-end. The company had liquidity of $1.5 billion at 2022-end, including approximately $1.4 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $2.98 billion, up from $2.93 billion at 2021-end.
Net cash from operations was $3.6 billion versus $1.74 billion in 2021. During the year, BLDR repurchased 41.9 million shares of its stock at an average price of $61.79 per share for $2.6 billion. Free cash flow was $3.27 billion for 2022.
Guidance
For first-quarter 2023, BLDR expects net sales to range between $3.4 billion and $3.7 billion. Adjusted EBITDA is expected to be between $400 million and $440 million. Adjusted EBITDA margin will likely range from 11.7-11.9%. In first-quarter 2022, net sales came in at $5.7 billion, adjusted EBITDA was $1 billion and adjusted EBITDA margins stood at 17.6%.
Due to the challenging housing market conditions, which may significantly impact the business, the company is not providing guidance for the full year 2023 but will reassess each quarter.
For 2023, the company expects interest expense in the range of $150-$170 million, an effective tax rate of 23-25%, total capital expenditures within $300-$350 million and productivity savings of $90-$110 million. Depreciation and amortization expenses are estimated between $525 million and $550 million, including approximately $160 million of amortization related to intangible assets acquired in the BMC merger.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 20.08% due to these changes.
VGM Scores
Currently, Builders FirstSource has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Builders FirstSource (BLDR) Up 0.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Builders FirstSource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Builders FirstSource’s Q4 Earnings Beat, Margins Down
Builders FirstSource reported fourth-quarter 2022 earnings surpassed the Zacks Consensus Estimate and increased strongly year over year. Net sales surpassed the consensus mark but declined year over year.
The result was hampered by declining single-family starts, two fewer selling days and commodity deflation, partially offset by growth from acquisitions.
Dave Rush, CEO of Builders FirstSource, said, “Our continuing focus on growing value-added products and operational excellence helped us to produce record full-year 2022 Adjusted EBITDA of $4.4 billion. While economic conditions have become more complex in recent months, I am confident that our exceptional geographic and end-market exposure as well as our experienced management team will lead us to achieve our strategic growth priorities.”
He added, “As we move into 2023, we will maintain our disciplined approach to capital deployment to ensure that we can continue to drive long-term value creation for our shareholders.”
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $3.21 per share, which handily topped the consensus mark of $2.37 by 35.4%. The reported figure also increased by 15.5% from the year-ago quarter.
Net sales of $4.36 billion surpassed the consensus mark of $4.23 billion by 2.8% but fell 6% on a year-over-year basis. Core organic sales also declined 7.7% from the prior-year quarter. A commodity price deflation of 3% of net sales and a decline of 3.2% due to two fewer selling days were partially offset by acquisitions contribution of 7.9%. Core organic sales in value-added products inched up 0.6% compared with the prior-year period.
Core organic growth in Single Family decreased by 13.9%, while R&R/Other and Multi-Family grew 14.9% and 15.1% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 52.3% of the quarterly net sales) were $2.28 billion, up 8.3% from the prior year. Within the segment, Manufactured products totaled $1.15 billion and Windows, doors & millwork stood at $1.13 billion compared with $1.18 billion and $924.9 million, respectively, a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 22.5% of the quarterly net sales) increased 15.5% from the year-ago quarter to $980.5 million.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.2% of the quarterly net sales) decreased 34.7% year over year to $1.1 billion.
Operating Highlights
Gross profit of $1.5 billion was flat year over year, but gross margin of 34.1% expanded 200 basis points (bps) on increased value-added product category mix. As a percentage of net sales, total SG&A expenses increased 340 bps to 22%.
Adjusted EBITDA fell 12.2% on a year-over-year basis to $0.7 billion. Adjusted EBITDA margin also contracted by 110 bps year over year to 16%.
2022 Highlights
In 2022, BLDR generated net sales of $22.7 billion, up 14.2% from the previous year. Of this growth, acquisitions contributed 1.1%, core organic sales supported 6.6% and commodity inflation added 1.1%. This was partially offset by two fewer selling days that impacted sales by 0.8%.
Adjusted earnings of $18.71 per share increased from $10.32 reported in 2021. The 45.7% improvement was backed by net sales growth, a higher mix of sales from value-added product categories and disciplined pricing, partially offset by higher income tax and SG&A expense.
Adjusted EBITDA margin rose 390 bps from the prior-year period to 19.3%.
Financial Details
As of Dec 31, 2022, Builders FirstSource had cash and cash equivalents of $80.4 million compared with $42.6 million at 2021-end. The company had liquidity of $1.5 billion at 2022-end, including approximately $1.4 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $2.98 billion, up from $2.93 billion at 2021-end.
Net cash from operations was $3.6 billion versus $1.74 billion in 2021. During the year, BLDR repurchased 41.9 million shares of its stock at an average price of $61.79 per share for $2.6 billion. Free cash flow was $3.27 billion for 2022.
Guidance
For first-quarter 2023, BLDR expects net sales to range between $3.4 billion and $3.7 billion. Adjusted EBITDA is expected to be between $400 million and $440 million. Adjusted EBITDA margin will likely range from 11.7-11.9%. In first-quarter 2022, net sales came in at $5.7 billion, adjusted EBITDA was $1 billion and adjusted EBITDA margins stood at 17.6%.
Due to the challenging housing market conditions, which may significantly impact the business, the company is not providing guidance for the full year 2023 but will reassess each quarter.
For 2023, the company expects interest expense in the range of $150-$170 million, an effective tax rate of 23-25%, total capital expenditures within $300-$350 million and productivity savings of $90-$110 million. Depreciation and amortization expenses are estimated between $525 million and $550 million, including approximately $160 million of amortization related to intangible assets acquired in the BMC merger.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 20.08% due to these changes.
VGM Scores
Currently, Builders FirstSource has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, 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 broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.