Builders FirstSource BLDR reported lackluster results for the third quarter of 2024, with earnings and net sales missing the Zacks Consensus Estimate.
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Also, both the metrics declined year over year owing to lower core organic sales and commodity deflation, partially offset by growth from acquisitions and one additional selling day. Margins also declined due to ongoing Multi-Family and core organic normalization.
Owing to the expected impact of price, commodities, and margins, BLDR has reduced net sales guidance for 2024 but slightly raised gross and adjusted EBITDA margin views. Shares of this manufacturer and supplier of building materials inched up 0.9% in the pre-market trading session on Nov 5.
Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $3.07, which lagged the consensus mark of $3.09 by 0.7%. The reported figure decreased 27.6% from the year-ago quarter owing to lower net sales, partially offset by share repurchases as well as lower adjusted operating and income tax expenses.
Builders FirstSource, Inc. Price, Consensus and EPS Surprise
Builders FirstSource, Inc. price-consensus-eps-surprise-chart | Builders FirstSource, Inc. Quote
Net sales of $4.23 billion missed the consensus mark of $4.47 billion by 5.2% and fell 6.7% on a year-over-year basis. Core organic sales declined 7.2% from the prior-year quarter. A commodity price deflation of 2.9% of net sales and softness in Multi-Family was partially offset by 2% growth from acquisitions and one additional selling day contribution of 1.4%.
Core organic growth in Single-Family decreased 4.6% and Multi-Family plunged 30.9%, while Repair and Remodel (R&R)/Other increased 0.8%. Multi-Family and Single-Family lowered net sales by 4.2% and 3.2%, respectively, while R&R/Other raised sales by 0.2%.
Sales According to Product Category
Value-Added Product Sales: For the reported quarter, sales of value-added products (comprising 49.2% of the quarterly net sales) were $2.08 billion, down 9.2% from the prior year. Within the segment, Manufactured products totaled $997.6 million and Windows, doors & millwork stood at $1.08 billion, down 16.9% and 0.8%, respectively, from a year ago.
Specialized Product & Other: Gypsum, Roofing & Insulation products sales (comprising 25.5% of the quarterly net sales) decreased 0.2% from the year-ago quarter to $1.08 billion.
Lumber & Lumber Sheet Goods: For the quarter, segment sales (comprising 25.3% of the quarterly net sales) decreased 7.6% year over year to $1.07 billion.
Operating Highlights
Gross margin of 32.8% contracted 210 basis points (bps) due to Multi-Family and core organic normalization. As a percentage of net sales, adjusted SG&A expenses increased 120 bps to 18.5%.
Adjusted EBITDA fell 23% on a year-over-year basis to $626.5 million. Adjusted EBITDA margin also contracted 310 bps year over year to 14.8%, owing to lower gross profit margins, partially offset by lower operating expenses.
BLDR delivered approximately $27 million in productivity savings related to operational excellence and supply chain initiatives.
Financial Details
As of Sept. 30, 2024, Builders FirstSource had cash and cash equivalents of $328.1 million, significantly up from $66.2 million at 2023-end. The company had liquidity of nearly $2 billion at the end of September, including $1.7 billion in net borrowing available under the revolving credit facility.
Long-term debt — net of current portion, discounts and issuance costs — was $3.7 billion, down from $3.18 billion at 2023-end. As of the third-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 $730 million, up from $649.5 million a year ago. Free cash flow was $634.7 million in the third quarter, down from $1.23 billion a year ago.
BLDR repurchased 0.9 million shares of its common stock at an average price of $176.73 per share for $159.7 million. It has approximately $840 million remaining in its $1 billion share repurchase authorization announced in August 2024.
2024 Guidance Revised
For 2024, BLDR now expects net sales between $16.25 billion and $16.55 billion compared with $16.4-$17.2 billion expected earlier. The estimated figure is down from $17.1 billion reported in 2023 at midpoint. Acquisitions completed within the last 12 months are projected to contribute 2-2.5% in net sales growth compared with 1.5-2% projected earlier.
Geographically, Single-Family starts are expected to increase by a low single-digit percentage, Multi-Family starts are projected to decline 25-30%, and R&R activity is anticipated to remain flat compared to the previous year.
Gross margin is likely to be in the range of 32-33% compared with 31.5-32.5% expected earlier. The projection is still down from 35.2% generated in 2023. Adjusted EBITDA is expected to be between $2.25 billion and $2.35 billion (compared with an earlier projection of $2.2-$2.4 billion), down from $2.9 billion reported in 2023. Adjusted EBITDA margin is expected to be in the range of 13.8-14.2% (compared with 13.4-14% of earlier expectation) compared with 17% in the prior year.
The company expects to deliver $110-$120 million in productivity savings in 2024.
Free cash flow is now expected to be in the $1.2-$1.4 billion range compared with $1-$1.2 billion expected earlier, assuming average commodity prices between $380 and $400 per thousand board feet (mbf). Total capital expenditures are likely to be in the range of $375-$425 million.
Zacks Rank & Recent Releases
BLDR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Beacon Roofing Supply, Inc. BECN reported lower-than-expected third-quarter 2024 results, with earnings and net sales missing the Zacks Consensus Estimate. The top line grew, while the bottom line declined year over year.
The year-over-year growth in the top line was backed by continued benefits realized from greenfield locations and acquired branches, along with strong demand trends for non-discretionary repair and reroofing. During the quarter, BECN added four greenfield locations in key markets, thereby boosting organic growth. Although softness in the overall activity level was a headwind, favorable price-cost across all lines of business driven by disciplined margin management aided the quarter’s results.
Starbucks Corporation SBUX reported fourth-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate but revenues missing the same. The bottom and top lines declined year over year.
Global comparable store sales declined 7% year over year. The downside was backed by a decrease of 8% in comparable transactions, partially overshadowed by a 2% increase in average tickets. During the quarter, SBUX opened 722 net new stores worldwide, bringing the total store count to 40,199.
Brinker International, Inc. EAT reported first-quarter fiscal 2025 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased from the prior-year figures.
EAT gained from the solid performance of Chili's. The upside was backed by favorable comparable restaurant sales driven by menu pricing, higher traffic and a favorable menu item mix. The segment’s company-owned comps rose 14.1% from the year-ago quarter’s level. The company projects fiscal 2025 earnings per share to be in the range of $5.2-$5.5, up from the prior estimate of $4.35-$4.75.
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