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Why Is Builders FirstSource (BLDR) Up 10.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 10.6% in that time frame, outperforming 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 Q3 Earnings Beat, Margins Down
Builders FirstSource third-quarter 2023 earnings and net sales surpassed the Zacks Consensus Estimate. However, both metrics declined year over year.
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $4.24 per share, which topped the consensus mark of $4.05 by 4.7%. The reported figure decreased by 18.5% from the year-ago quarter owing to lower net sales, partially offset by share repurchases.
Net sales of $4.53 billion surpassed the consensus mark of $4.87 billion by 6.9% but fell 21.3% on a year-over-year basis. The decline was mainly due to a weaker housing market and commodity deflation, partially offset by growth from acquisitions.
Core organic sales also declined 13.5% from the prior-year quarter. A commodity price deflation of 9.1% of net sales and a decline of 1.6% due to one fewer selling day were partially offset by contributions from acquisitions of 2.9%. Core organic growth in Single-Family decreased by 19.2% and R&R/Other and Multi-Family grew by 1.4% and 6.4% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 50.7% of the quarterly net sales) were $2.3 billion, down 17.7% from the prior year. Within the segment, Manufactured products totaled $1.2 billion and Windows, doors & millwork stood at $1.1 billion, down 20.2% and 14.8%, respectively, from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 23.9% of the quarterly net sales) decreased 5.8% from the year-ago quarter to $1.08 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.4% of the quarterly net sales) decreased 36.7% year over year to $1.15 billion.
Operating Highlights
Gross margin of 34.9% contracted 10 basis points (bps) due to core organic margin normalization and partially offset by Multi-Family strength. As a percentage of net sales, total SG&A expenses increased 330 bps to 20.7%.
Adjusted EBITDA fell 30.6% on a year-over-year basis to $813.3 million. Adjusted EBITDA margin also contracted by 240 bps year over year to 17.9%, owing to lower net sales and reduced operating leverage.
Financial Details
As of Sep 30, 2023, Builders FirstSource had cash and cash equivalents of $88.1 million, up from $80.4 million at 2022-end. The company had liquidity of $1.1 billion at the third quarter’s end, including $1 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $3.4 billion, up from $2.98 billion at 2022-end. Net cash from operations was $649.5 million during the quarter versus $851.3 million a year ago. The free cash flow was $537.8 million for the third quarter, reflecting a decrease from $611.5 million in the year-ago period.
During the quarter, Builders FirstSource repurchased 1.7 million shares of its stock for $244.9 million and completed two acquisitions. It has $0.4 billion remaining on its $1 billion share repurchase authorization approved in April 2023.
Guidance
For 2023, the company reduced the upper limit of its net sales projection to $16.8-17.1 billion from $17.8 billion. Gross margin is now anticipated between 34% and 35% (from 33-35%), adjusted EBITDA in the band of $2.7-$2.8 billion (from $2.6-$2.9 billion) and adjusted EBITDA margin between 15.8% and 16.7% (versus 15-17%).
Single-Family starts are projected to be down low double-digits to high single-digits. Multi-Family starts are likely to be up low double-digits and R&R is projected to be up low-to-mid-single digits. Acquisitions completed within the last twelve months are projected to add net sales growth of 2-3%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Builders FirstSource has a strong 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 20% 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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Why Is Builders FirstSource (BLDR) Up 10.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Builders FirstSource (BLDR - Free Report) . Shares have added about 10.6% in that time frame, outperforming 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 Q3 Earnings Beat, Margins Down
Builders FirstSource third-quarter 2023 earnings and net sales surpassed the Zacks Consensus Estimate. However, both metrics declined year over year.
Earnings & Revenue Discussion
The manufacturer and supplier of building materials reported adjusted earnings of $4.24 per share, which topped the consensus mark of $4.05 by 4.7%. The reported figure decreased by 18.5% from the year-ago quarter owing to lower net sales, partially offset by share repurchases.
Net sales of $4.53 billion surpassed the consensus mark of $4.87 billion by 6.9% but fell 21.3% on a year-over-year basis. The decline was mainly due to a weaker housing market and commodity deflation, partially offset by growth from acquisitions.
Core organic sales also declined 13.5% from the prior-year quarter. A commodity price deflation of 9.1% of net sales and a decline of 1.6% due to one fewer selling day were partially offset by contributions from acquisitions of 2.9%. Core organic growth in Single-Family decreased by 19.2% and R&R/Other and Multi-Family grew by 1.4% and 6.4% year over year, respectively.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 50.7% of the quarterly net sales) were $2.3 billion, down 17.7% from the prior year. Within the segment, Manufactured products totaled $1.2 billion and Windows, doors & millwork stood at $1.1 billion, down 20.2% and 14.8%, respectively, from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 23.9% of the quarterly net sales) decreased 5.8% from the year-ago quarter to $1.08 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.4% of the quarterly net sales) decreased 36.7% year over year to $1.15 billion.
Operating Highlights
Gross margin of 34.9% contracted 10 basis points (bps) due to core organic margin normalization and partially offset by Multi-Family strength. As a percentage of net sales, total SG&A expenses increased 330 bps to 20.7%.
Adjusted EBITDA fell 30.6% on a year-over-year basis to $813.3 million. Adjusted EBITDA margin also contracted by 240 bps year over year to 17.9%, owing to lower net sales and reduced operating leverage.
Financial Details
As of Sep 30, 2023, Builders FirstSource had cash and cash equivalents of $88.1 million, up from $80.4 million at 2022-end. The company had liquidity of $1.1 billion at the third quarter’s end, including $1 billion in net borrowing available under the revolving credit facility. Long-term debt — net of current portion, discounts and issuance costs — was $3.4 billion, up from $2.98 billion at 2022-end. Net cash from operations was $649.5 million during the quarter versus $851.3 million a year ago. The free cash flow was $537.8 million for the third quarter, reflecting a decrease from $611.5 million in the year-ago period.
During the quarter, Builders FirstSource repurchased 1.7 million shares of its stock for $244.9 million and completed two acquisitions. It has $0.4 billion remaining on its $1 billion share repurchase authorization approved in April 2023.
Guidance
For 2023, the company reduced the upper limit of its net sales projection to $16.8-17.1 billion from $17.8 billion. Gross margin is now anticipated between 34% and 35% (from 33-35%), adjusted EBITDA in the band of $2.7-$2.8 billion (from $2.6-$2.9 billion) and adjusted EBITDA margin between 15.8% and 16.7% (versus 15-17%).
Single-Family starts are projected to be down low double-digits to high single-digits. Multi-Family starts are likely to be up low double-digits and R&R is projected to be up low-to-mid-single digits. Acquisitions completed within the last twelve months are projected to add net sales growth of 2-3%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Builders FirstSource has a strong 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 20% 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.