Builders FirstSource (BLDR) Up 0.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Builders FirstSource (BLDR). Shares have added about 0.2% in that time frame, underperforming 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 catalysts. Builders FirstSource Q3 Earnings & Net Sales Miss, Margins DownBuilders FirstSource reported lackluster results for the third quarter of 2024, with earnings and net sales missing the Zacks Consensus Estimate.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.Earnings & Revenue DiscussionThe 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.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 CategoryValue-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 HighlightsGross 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 DetailsAs 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, up 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 RevisedFor 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.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in fresh estimates.VGM ScoresCurrently, Builders FirstSource has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 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.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Builders FirstSource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerBuilders FirstSource belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Beacon Roofing Supply (BECN), has gained 12.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.Beacon Roofing reported revenues of $2.77 billion in the last reported quarter, representing a year-over-year change of +7.3%. EPS of $2.80 for the same period compares with $2.85 a year ago.For the current quarter, Beacon Roofing is expected to post earnings of $1.73 per share, indicating a change of +0.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.5% over the last 30 days.Beacon Roofing has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Builders FirstSource, Inc. (BLDR): Free Stock Analysis Report Beacon Roofing Supply, Inc. (BECN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks