GMS Inc. (GMS Quick QuoteGMS - Free Report) reported tepid results for first-quarter fiscal 2025 (ended July 31, 2024), wherein its earnings and net sales missed the Zacks Consensus Estimate. The top line grew, while the bottom line declined year over year.

The quarterly results reflect volume growth (including acquisitions) and resilient pricing in most of the company’s main product lines, partially offset by reduced activity levels across all its end markets due to the ongoing economic uncertainties and steel price deflation. Increased activity-based employee compensation and warehouse, along with the ongoing inflationary risks, pressured the bottom line to a great extent. GMS expects the ongoing economic uncertainties to continue in the near term and is bracing itself accordingly to counter the adverse impacts.

The company’s focus on executing its cost reduction program, inorganic activities and other strategic initiatives is likely to position it well in the market amid the ongoing disruptions.

GMS’ Quarterly Results in Detail

GMS reported adjusted earnings per share (EPS) of $1.93, which missed the Zacks Consensus Estimate of $2.11 million by 8.5%. In the year-ago quarter, it reported an adjusted EPS of $2.40.

Net sales of $1.45 billion also lagged the consensus mark of $1.49 million by 2.7% but increased 2.8% year over year.

Organic net sales declined 2.2% from the prior year. Volume growth across all major product lines was partially offset by steel price deflation and weaker demand patterns in commercial and multi-family end markets. On a per-day basis, net sales were up 2.8% year over year (2.2% organically).

Performance of GMS’ Segments

Wallboard sales inched up 2.9% from a year ago to $587.9 million. Organically, sales were up 1.1% year over year.

Ceilings sales increased 18.2% year over year to $207.2 million. Organically, this segment’s sales rose 5.7% from the year-ago quarter.

Steel Framing sales of $209.9 million declined 11.4% from the prior-year quarter. Organically, the segment’s sales moved down 15.3% from the year-ago figure.

Complementary Product sales grew 4.1% from the prior-year period to $443.5 million. Organically, sales declined 2.2% from the year-ago period.

GMS’ Operating Highlights

Gross profit increased 0.2% from the year-ago period to $451.6 million, mainly due to the mixed impacts of the steel price deflation, price and cost dynamics in the Wallboard segment and a shift from commercial and multi-family to single-family Wallboard deliveries. The gross margin contracted 80 basis points (bps) year over year to 32%.

Adjusted selling, general and administrative expenses — as a percentage of net sales — grew 140 bps to 21.2%.

Adjusted EBITDA of $145.9 million decreased 15.8% from a year ago. Adjusted EBITDA margin of 10.1% contracted 220 bps from 12.3% a year ago.

GMS' Financials

As of July 31, 2024, the company had cash and cash equivalents of $53.2 million, down from $166.1 million at the end of fiscal 2024. As of the fiscal first-quarter end, available liquidity under GMS’ revolving credit facilities was $565.3 million. Long-term debt (less the current portions) amounted to $1.33 billion at the fiscal first-quarter end, up from $1.23 billion at the end of fiscal 2024.

Cash used in operating activities was $22.9 million as of the first three months of fiscal 2025 against cash provided by operating activities of $6.6 million in the comparable year-ago period.

During the fiscal first quarter, GMS repurchased 538,078 shares of common stock for $46.2 million. As of July 31, 2024, it had $154.3 million of share repurchase authorization remaining.

GMS' Zacks Rank & Recent Retail-Wholesale Releases

GMS currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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