It has been about a month since the last earnings report for NCI Building Systems, Inc. . Shares have added about 3.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 catalysts.
NCI Building Q2 Earnings Beat Estimates, Hikes Outlook
NCI Building Systems posted adjusted earnings of $0.16 per share for second-quarter fiscal 2017 (ended Apr 30, 2017), fourfold the earnings of $0.04 in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $0.12, leading to a positive earnings surprise of 33%. Including one-time items, the company reported earnings per share of $0.24 compared with $0.03 a share recorded in the prior-year quarter.
Operational Update
Sales rose 12.8% year over year to $420 million in the quarter and also surpassed the Zacks Consensus Estimate of $415 million. Revenues came within the company’s guided range of $400–$425 million. The year-over-year growth was bolstered by an improvement in underlying tonnage volumes and increased pricing.
Cost of sales increased 12.6% year over year to $319 million from $284 million in the year-ago quarter. Gross profit increased 14% year over year to $100.5 million. Consequently, gross margin expanded 10 basis points (bps) to 23.9% in the quarter, aided by a combination of manufacturing efficiencies, and improved segment and product mix. This was particularly witnessed in insulated metal panels (IMP) as the result of higher architectural panel sales.
Engineering, selling, general and administrative expenses inched up 1% to $75 million. The company reported adjusted operating income of $23.6 million, which soared around 107% from $11.4 million in the year-ago quarter. Operating margin was at 5.6%, a 250 bps improvement year over year.
Segment Performance
Revenues at the Building Systems segment went up 18% to $163 million from $138 million in the year-earlier quarter. The segment reported adjusted operating income of $7.2 million, a 13% rise from $6.4 million in the year-ago quarter.
The Coatings division reported revenues of $63.3 million, advancing 15% year over year. Adjusted operating profit improved 16% year over year to $5.5 million.
The Metal Component segment’s revenues climbed 15% year over year to $271 million. On adjusted basis, operating profit surged 67% year over year to $30.8 million.
Financial Update
NCI Building ended the quarter with cash and cash equivalents of $49.7 million as of Apr 30, 2017, compared with $65.4 million at the end of the Oct 30, 2016. The company generated cash used in operations of $6.4 million for the fiscal first half compared with $20 million in the prior-year comparable period. Long-term debt was $387 million as of Apr 30, 2017, compared with $396 million as of Oct 30, 2016.
NCI Building’s consolidated backlog advanced 3.2% year over year to $552 million at the end of the reported quarter.
Outlook
For fiscal 2017, NCI Building hiked revenue guidance range to $1.80–$1.86 billion from the previous range of $1.75–$1.85 billion. Adjusted EBITDA is now forecasted in the range of $180–$200 million, up from the prior range of $175–$205 million. The company anticipates performance in second-half 2017 to be better than the first-half performance, on the back of the company’s ongoing cost savings initiatives and opportunities to expand IMP product lines.
The company's cost-saving initiatives in manufacturing consolidation and ESG&A are projected to generate $30–$40 million in cost savings by the end of 2018. During fiscal 2017, these two initiatives are anticipated to generate an incremental $10 million in cost savings.
For third-quarter fiscal 2017, NCI Building estimates revenues to be in the range of $480– $505 million and adjusted EBITDA to be in the range of $48–$58 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend for fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 17.3% due to these changes.
VGM Scores
At this time, NCI Building's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.
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NCI Building (NCS) Up 3.9% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for NCI Building Systems, Inc. . Shares have added about 3.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 catalysts.
NCI Building Q2 Earnings Beat Estimates, Hikes Outlook
NCI Building Systems posted adjusted earnings of $0.16 per share for second-quarter fiscal 2017 (ended Apr 30, 2017), fourfold the earnings of $0.04 in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $0.12, leading to a positive earnings surprise of 33%. Including one-time items, the company reported earnings per share of $0.24 compared with $0.03 a share recorded in the prior-year quarter.
Operational Update
Sales rose 12.8% year over year to $420 million in the quarter and also surpassed the Zacks Consensus Estimate of $415 million. Revenues came within the company’s guided range of $400–$425 million. The year-over-year growth was bolstered by an improvement in underlying tonnage volumes and increased pricing.
Cost of sales increased 12.6% year over year to $319 million from $284 million in the year-ago quarter. Gross profit increased 14% year over year to $100.5 million. Consequently, gross margin expanded 10 basis points (bps) to 23.9% in the quarter, aided by a combination of manufacturing efficiencies, and improved segment and product mix. This was particularly witnessed in insulated metal panels (IMP) as the result of higher architectural panel sales.
Engineering, selling, general and administrative expenses inched up 1% to $75 million. The company reported adjusted operating income of $23.6 million, which soared around 107% from $11.4 million in the year-ago quarter. Operating margin was at 5.6%, a 250 bps improvement year over year.
Segment Performance
Revenues at the Building Systems segment went up 18% to $163 million from $138 million in the year-earlier quarter. The segment reported adjusted operating income of $7.2 million, a 13% rise from $6.4 million in the year-ago quarter.
The Coatings division reported revenues of $63.3 million, advancing 15% year over year. Adjusted operating profit improved 16% year over year to $5.5 million.
The Metal Component segment’s revenues climbed 15% year over year to $271 million. On adjusted basis, operating profit surged 67% year over year to $30.8 million.
Financial Update
NCI Building ended the quarter with cash and cash equivalents of $49.7 million as of Apr 30, 2017, compared with $65.4 million at the end of the Oct 30, 2016. The company generated cash used in operations of $6.4 million for the fiscal first half compared with $20 million in the prior-year comparable period. Long-term debt was $387 million as of Apr 30, 2017, compared with $396 million as of Oct 30, 2016.
NCI Building’s consolidated backlog advanced 3.2% year over year to $552 million at the end of the reported quarter.
Outlook
For fiscal 2017, NCI Building hiked revenue guidance range to $1.80–$1.86 billion from the previous range of $1.75–$1.85 billion. Adjusted EBITDA is now forecasted in the range of $180–$200 million, up from the prior range of $175–$205 million. The company anticipates performance in second-half 2017 to be better than the first-half performance, on the back of the company’s ongoing cost savings initiatives and opportunities to expand IMP product lines.
The company's cost-saving initiatives in manufacturing consolidation and ESG&A are projected to generate $30–$40 million in cost savings by the end of 2018. During fiscal 2017, these two initiatives are anticipated to generate an incremental $10 million in cost savings.
For third-quarter fiscal 2017, NCI Building estimates revenues to be in the range of $480– $505 million and adjusted EBITDA to be in the range of $48–$58 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend for fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 17.3% due to these changes.
NCI Building Systems, Inc. Price and Consensus
NCI Building Systems, Inc. Price and Consensus | NCI Building Systems, Inc. Quote
VGM Scores
At this time, NCI Building's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.