Yahoo Finance TopBuild (BLD) Up 1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for TopBuild (BLD). Shares have added about 1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TopBuild 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 drivers.
TopBuild Q2 Earnings & Sales Miss Estimates, View Down
TopBuild reported lackluster second-quarter 2024 results. Both earnings and sales lagged the Zacks Consensus Estimate. This was mainly due to higher interest rates, project delays and supply constraints that continue to impact results across some residential and commercial end markets. The company has also trimmed its sales and adjusted EBITDA views for 2024.
Nonetheless, both earnings and sales increased on a year-over-year basis given pricing, increased volumes and benefited from acquisitions despite the challenges.
Inside the Headlines
TopBuild reported adjusted earnings per share (EPS) of $5.42 per share, which missed the Zacks Consensus Estimate of $5.68 by 4.6%. Yet, the metric grew 3.2% year over year.
Net sales of $1,365.6 million (the highest quarter in the company’s history) lagged the consensus mark of $1,396 million by 2.2% but increased 3.7% year over year. Mergers and acquisitions (M&A), after accounting for a disposition, led to a 2.3% increase, with prices rising by 1.3%.
Segmental Performance
Installation (which accounted for 62.3% of total net sales): The segment’s net revenues came in at $851 million, up 5.2% year over year. Residential sales for the segment grew 6.7%, driven by improved single-family home sales both sequentially and year over year, along with strong multi-family sales supported by backlog. However, commercial sales in the segment declined 1.9% due to shifts in project timing and material availability. M&A contributed 2.9% to the sales increase, pricing added 1.3%, and volume rose 1.0%. The segment’s adjusted operating margin contracted 120 basis points (bps) year over year to 20.1%.
Specialty Distribution (43.4%): The segment’s net sales rose 3.2% year over year to $593 million. Volume improved 0.6%, with pricing and acquisitions each contributing an additional 1.3% to sales. The segment’s residential sales increased 4.6% due to rising demand for single-family homes. Additionally, commercial and industrial sales in the segment grew 2.3%. The segment’s adjusted operating margin improved 10 bps year over year to 15.1%.
Operating Highlights
Adjusted gross margin contracted 100 bps year over year to 31%. Adjusted SG&A expenses, as a percentage of sales, improved 30 bps to 13.6% from a year ago. Adjusted operating margin declined 80 bps to 13.6% from a year ago.
Adjusted EBITDA improved 0.8% year over year to $277.7 million. However, adjusted EBITDA margin contracted 60 bps to 20.3% from the year-ago figure.
Financials
As of Jun 30, 2024, TopBuild had cash and cash equivalents of $463.2 million compared with $848.6 million at 2023-end. Long-term debt at the second quarter of 2024-end was $1.35 billion, down from $1.37 billion at 2023-end.
Net cash provided by operations was $269.1 million in the first six months of 2024, down from $385.8 million a year ago.
As of Jun 30, 2024, BLD repurchased around 1.25 million shares for a total of $505.2 million.
Acquisitions
Year to date, BLD has acquired six insulation companies, which are projected to generate approximately $107 million in annual revenues. The acquisitions include Brabble Insulation, with annual revenues of $5.2 million, closed in February and included in the Installation segment; Morris Black & Sons, generating $3.8 million in annual revenues, closed in March and part of the Installation segment; Pest Control Insulation, with $25.4 million in annual revenues, closed in March and included in the Distribution segment; Green Space Insulation, with $6 million in annual revenues, closed in April and part of the Installation segment; Insulation Works, generating $28 million in annual revenues, closed in May and included in the Installation segment; and Texas Insulation, with annual revenues of $38.9 million, closed in May and part of the Installation segment.
2024 Guidance
TopBuild now expects net sales between $5.3 and $5.5 billion versus $5.4 billion-$5.6 billion of earlier expectations. The estimated figure indicates an increase from $5.19 billion reported in 2023.
Adjusted EBITDA is now projected to be between $1.055 billion and $1.125 billion versus $1.065 billion-$1.155 billion of prior projection. This suggests growth (considering the midpoint of the guided range) from $1.05 billion reported in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, TopBuild 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 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TopBuild has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
TopBuild is part of the Zacks Building Products - Miscellaneous industry. Over the past month, Gibraltar Industries (ROCK), a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended June 2024 more than a month ago.
Gibraltar Industries reported revenues of $353.01 million in the last reported quarter, representing a year-over-year change of -3.3%. EPS of $1.18 for the same period compares with $1.18 a year ago.
Gibraltar Industries is expected to post earnings of $1.39 per share for the current quarter, representing a year-over-year change of +0.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Gibraltar Industries has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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