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Builders FirstSource's (BLDR) Shares Dip on Q2 Earnings Miss
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Builders FirstSource, Inc. (BLDR - Free Report) reported mixed results for the second quarter of 2024 with earnings surpassing the Zacks Consensus Estimate but net sales missing the same.
Both earnings and sales declined year over year owing to weaker-than-expected Single-Family starts, slowing Multi-Family, and broader housing affordability challenges.
Shares of this manufacturer and supplier of building materials dipped 5.4% in the pre-market trading session on Aug 6.
On an impressive note, BLDR achieved around $37 million in productivity savings through operational excellence and supply-chain initiatives in the second quarter. Year to date, these efforts have resulted in approximately $77 million in savings. For 2024, the company anticipates delivering between $90 million and $110 million in productivity savings.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
The company reported adjusted earnings per share (EPS) of $3.50, which beat the consensus mark of $3.14 by 11.5%. The reported figure declined 10% from the year-ago EPS figure of $3.89 owing to lower sales.
Net sales of $4.46 billion missed the consensus mark of $4.48 billion by 0.4% and decreased 1.6% on a year-over-year basis. The decline in sales of BLDR was primarily driven by a significant downturn in the Multi-Family segment, which experienced a 31.3% dip. This substantial decrease in Multi-Family sales outweighed the modest gains in other areas, such as a 1.1% increase in Single-Family and a 1.5% rise in Repair and Remodel (R&R)/Other.
Overall, core organic sales declined 3.8%, contributing to a net sales decrease of 1.6%. This decline was somewhat mitigated by 1.9% growth from acquisitions and a 0.3% rise due to commodity inflation.
Sales According to Product Category
Value-Added Product Sales: For the quarter, sales of value-added products (comprising 48.7% of total net sales) were $2.17 billion, down 9% from the prior year (declined 3.4% organically). Within the segment, Manufactured products decreased 18.5% and Windows, doors & millwork fell 2.2% from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 24.5% of total net sales) increased 0.8% from the year-ago quarter to $1.09 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 26.8% of the quarterly net sales) rose 12.7% year over year to $1.19 billion.
Operating Highlights
Gross margin of 32.8% contracted 240 basis points (bps) due to a timing shift in product mix toward lower-margin, early-stage homebuilding products and margin normalization, particularly in Multi-Family.
As a percentage of net sales, SG&A improved 70 bps to 21.8%.
Adjusted EBITDA fell 12.9% to $669.7 million, mainly due to a reduction in gross profit, which was partially counterbalanced by a decrease in operating expenses. Adjusted EBITDA margin decreased 200 bps to 15% compared to the same period last year, primarily because of lower gross margins, though this was somewhat offset by reduced operating expenses.
Financial Details
As of Jun 30, 2024, Builders FirstSource had cash and cash equivalents of $75.6 million, up from $66.2 million at 2023-end. The company had liquidity of $1.7 billion at the end of June, including $1.6 billion in net borrowing available under the revolving credit facility.
Long-term debt — net of current portion, discounts and issuance costs — was $3.8 billion, down from $3.2 billion at 2023-end. As of the second-quarter end, net debt to trailing 12-month adjusted EBITDA ratio was 1.4x compared with 1.1x in the prior year.
Net cash from operations was $452.1 million, down 41.2% versus $769.3 million a year ago. Free cash flow was $366.7 million in the second quarter, down from $594.3 million a year ago.
BLDR repurchased 5.8 million shares of its common stock at an average price of $170.01 per share for $989.6 million. The company’s board of directors recently authorized a new repurchase plan of up to $1 billion of the company’s outstanding shares of common stock.
2024 Guidance Cut
For 2024, BLDR now expects net sales between $16.4 billion and $17.2 billion versus $17.5 billion-$18.5 billion expected earlier. The estimated figure is up from $17.1 billion reported in 2023 at midpoint. Acquisitions completed within the last 12 months are projected to contribute 1.5% to 2% in net sales growth versus 1-1.5% projected earlier.
Geographically, Single-Family starts are expected to increase by a low single-digit percentage, Multi-Family starts are projected to decline 25% to 30%, and R&R activity is anticipated to remain flat compared to the previous year. Earlier, the company had expected Single-Family starts to be up in the mid-single digits and R&R to be up in the low-single digits but Multi-Family starts were expected to be down by 20-30%.
Gross margin is likely to be in the range of 31.5-32.5% versus 30-33% expected earlier. The projection was down from 35.2% generated in 2023. Adjusted EBITDA is expected to be between $2.2 billion and $2.4 billion (versus an earlier projection of $2.4 billion-$2.8 billion), down from $2.9 billion reported in 2023. Adjusted EBITDA margin is expected to be in the range of 13.4-14% (versus 14-15% of earlier expectation) compared with 17% in the prior year.
Free cash flow is still expected to be in the $1-$1.2 billion range, assuming average commodity prices between $380 and $400 per thousand board feet (mbf).
Beacon Roofing Supply, Inc. (BECN - Free Report) reported dull second-quarter 2024 results, with earnings and net sales missing the Zacks Consensus Estimate. While the company experienced a top-line increase, there was a decline in EPS compared with the previous year’s tally.
However, BECN showcased consistent net sales growth over the last 14 quarters, underscoring the robustness of its business model.
Starbucks Corporation (SBUX - Free Report) reported mixed third-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate but revenues missing the same. The top and bottom lines declined on a year-over-year basis. The downside was caused by competitive market dynamics in China, macro challenges and price wars.
In the fiscal third quarter, SBUX reported adjusted EPS of 93 cents, in line with the Zacks Consensus Estimate. The bottom line declined 7% year over year from $1.00. Quarterly revenues of $9,113.9 million missed the Zacks Consensus Estimate of $9,224 million. The top line dropped 0.6% on a year-over-year basis due to dismal international revenues. Global comparable store sales declined 3% year over year. The downside was backed by a decline of 5% in comparable transactions, partially overshadowed by a 2% increase in average tickets.
Chipotle Mexican Grill, Inc. (CMG - Free Report) released impressive second-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. During the quarter, the company benefited from successful promotions regarding Chicken Al Pastor driving significant engagement and sales. The emphasis on throughput and staff training proved effective in meeting heightened demand and supported transaction growth.
During the second quarter, CMG reported adjusted EPS of 34 cents, outpacing the Zacks Consensus Estimate of 31 cents. The bottom line increased 36% from 25 cents reported in the year-ago quarter. Quarterly revenues of $2.97 billion surpassed the consensus mark of $2.94 billion by 1.3%. The top line rose 18.2% on a year-over-year basis. The upside was driven by strong comparable restaurant sales growth backed by increased transactions (8.7%) and average checks (2.4%).
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Builders FirstSource's (BLDR) Shares Dip on Q2 Earnings Miss
Builders FirstSource, Inc. (BLDR - Free Report) reported mixed results for the second quarter of 2024 with earnings surpassing the Zacks Consensus Estimate but net sales missing the same.
Both earnings and sales declined year over year owing to weaker-than-expected Single-Family starts, slowing Multi-Family, and broader housing affordability challenges.
Shares of this manufacturer and supplier of building materials dipped 5.4% in the pre-market trading session on Aug 6.
On an impressive note, BLDR achieved around $37 million in productivity savings through operational excellence and supply-chain initiatives in the second quarter. Year to date, these efforts have resulted in approximately $77 million in savings. For 2024, the company anticipates delivering between $90 million and $110 million in productivity savings.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
Builders FirstSource, Inc. price-consensus-eps-surprise-chart | Builders FirstSource, Inc. Quote
Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $3.50, which beat the consensus mark of $3.14 by 11.5%. The reported figure declined 10% from the year-ago EPS figure of $3.89 owing to lower sales.
Net sales of $4.46 billion missed the consensus mark of $4.48 billion by 0.4% and decreased 1.6% on a year-over-year basis. The decline in sales of BLDR was primarily driven by a significant downturn in the Multi-Family segment, which experienced a 31.3% dip. This substantial decrease in Multi-Family sales outweighed the modest gains in other areas, such as a 1.1% increase in Single-Family and a 1.5% rise in Repair and Remodel (R&R)/Other.
Overall, core organic sales declined 3.8%, contributing to a net sales decrease of 1.6%. This decline was somewhat mitigated by 1.9% growth from acquisitions and a 0.3% rise due to commodity inflation.
Sales According to Product Category
Value-Added Product Sales: For the quarter, sales of value-added products (comprising 48.7% of total net sales) were $2.17 billion, down 9% from the prior year (declined 3.4% organically). Within the segment, Manufactured products decreased 18.5% and Windows, doors & millwork fell 2.2% from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 24.5% of total net sales) increased 0.8% from the year-ago quarter to $1.09 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 26.8% of the quarterly net sales) rose 12.7% year over year to $1.19 billion.
Operating Highlights
Gross margin of 32.8% contracted 240 basis points (bps) due to a timing shift in product mix toward lower-margin, early-stage homebuilding products and margin normalization, particularly in Multi-Family.
As a percentage of net sales, SG&A improved 70 bps to 21.8%.
Adjusted EBITDA fell 12.9% to $669.7 million, mainly due to a reduction in gross profit, which was partially counterbalanced by a decrease in operating expenses. Adjusted EBITDA margin decreased 200 bps to 15% compared to the same period last year, primarily because of lower gross margins, though this was somewhat offset by reduced operating expenses.
Financial Details
As of Jun 30, 2024, Builders FirstSource had cash and cash equivalents of $75.6 million, up from $66.2 million at 2023-end. The company had liquidity of $1.7 billion at the end of June, including $1.6 billion in net borrowing available under the revolving credit facility.
Long-term debt — net of current portion, discounts and issuance costs — was $3.8 billion, down from $3.2 billion at 2023-end. As of the second-quarter end, net debt to trailing 12-month adjusted EBITDA ratio was 1.4x compared with 1.1x in the prior year.
Net cash from operations was $452.1 million, down 41.2% versus $769.3 million a year ago. Free cash flow was $366.7 million in the second quarter, down from $594.3 million a year ago.
BLDR repurchased 5.8 million shares of its common stock at an average price of $170.01 per share for $989.6 million. The company’s board of directors recently authorized a new repurchase plan of up to $1 billion of the company’s outstanding shares of common stock.
2024 Guidance Cut
For 2024, BLDR now expects net sales between $16.4 billion and $17.2 billion versus $17.5 billion-$18.5 billion expected earlier. The estimated figure is up from $17.1 billion reported in 2023 at midpoint. Acquisitions completed within the last 12 months are projected to contribute 1.5% to 2% in net sales growth versus 1-1.5% projected earlier.
Geographically, Single-Family starts are expected to increase by a low single-digit percentage, Multi-Family starts are projected to decline 25% to 30%, and R&R activity is anticipated to remain flat compared to the previous year. Earlier, the company had expected Single-Family starts to be up in the mid-single digits and R&R to be up in the low-single digits but Multi-Family starts were expected to be down by 20-30%.
Gross margin is likely to be in the range of 31.5-32.5% versus 30-33% expected earlier. The projection was down from 35.2% generated in 2023. Adjusted EBITDA is expected to be between $2.2 billion and $2.4 billion (versus an earlier projection of $2.4 billion-$2.8 billion), down from $2.9 billion reported in 2023. Adjusted EBITDA margin is expected to be in the range of 13.4-14% (versus 14-15% of earlier expectation) compared with 17% in the prior year.
Free cash flow is still expected to be in the $1-$1.2 billion range, assuming average commodity prices between $380 and $400 per thousand board feet (mbf).
Zacks Rank
BLDR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Retail-Wholesale Releases
Beacon Roofing Supply, Inc. (BECN - Free Report) reported dull second-quarter 2024 results, with earnings and net sales missing the Zacks Consensus Estimate. While the company experienced a top-line increase, there was a decline in EPS compared with the previous year’s tally.
However, BECN showcased consistent net sales growth over the last 14 quarters, underscoring the robustness of its business model.
Starbucks Corporation (SBUX - Free Report) reported mixed third-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate but revenues missing the same. The top and bottom lines declined on a year-over-year basis. The downside was caused by competitive market dynamics in China, macro challenges and price wars.
In the fiscal third quarter, SBUX reported adjusted EPS of 93 cents, in line with the Zacks Consensus Estimate. The bottom line declined 7% year over year from $1.00. Quarterly revenues of $9,113.9 million missed the Zacks Consensus Estimate of $9,224 million. The top line dropped 0.6% on a year-over-year basis due to dismal international revenues. Global comparable store sales declined 3% year over year. The downside was backed by a decline of 5% in comparable transactions, partially overshadowed by a 2% increase in average tickets.
Chipotle Mexican Grill, Inc. (CMG - Free Report) released impressive second-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. During the quarter, the company benefited from successful promotions regarding Chicken Al Pastor driving significant engagement and sales. The emphasis on throughput and staff training proved effective in meeting heightened demand and supported transaction growth.
During the second quarter, CMG reported adjusted EPS of 34 cents, outpacing the Zacks Consensus Estimate of 31 cents. The bottom line increased 36% from 25 cents reported in the year-ago quarter. Quarterly revenues of $2.97 billion surpassed the consensus mark of $2.94 billion by 1.3%. The top line rose 18.2% on a year-over-year basis. The upside was driven by strong comparable restaurant sales growth backed by increased transactions (8.7%) and average checks (2.4%).