It has been a month since the last earnings report for Beacon Roofing Supply (BECN). The shares gained around 3.4% during this period, lagging the S&P 500.
Will the recent positive trend last until the next earnings release, or is Beacon Roofing about to retreat? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the latest earnings report to get a better handle on the key drivers.
Beacon’s Q4 Earnings & Revenues exceed expectations
Beacon Roofing achieved impressive results in the fourth quarter of fiscal 2020. The income statement exceeded the respective Zacks consensus estimate, which was mainly supported by a solid residential environment and stronger gross margins.
Julian Francis, President and Chief Executive Officer of Beacon, said, “The strong execution by our team and the convenient living environment pushed our adjusted EBITDA to record levels for the fourth quarter.”
The shares of this largest distributor of roofing materials for residential and non-residential buildings rose 18.5% over the past three months versus the industry’s 5.1% decline.
Quarter in detail
Beacon reported adjusted earnings of $ 1.30 per share, beating the consensus mark of $ 1.02 by 27.5%. For the same period last year, the company posted earnings of $ 1.04 per share. Despite low revenues, aggressive cost-cutting measures contributed to the bottom line. A solid living environment and gross margins, supported by price execution, mix and timing, are a good sign.
Net sales of $ 2,018 million exceeded the consensus mark of $ 2,017 million by 0.1%, but declined 0.6% year-over-year due to lower demand from non-residential categories and states, partly driven by the solidity Offsetting the industry-leading digital platform’s contribution, which accounted for more than 10% of September sales.
Sales of residential roofing products (48% of net sales) increased 6.2%, while sales of non-residential roofing products (22.1%) and ancillary products (29.9%) rose 11.7% and 1.5, respectively % decreased.
The story goes on
The gross margin of 25.5% improved 140 basis points, or basis points, sequentially and increased 120 basis points for the quarter year over year. The successful implementation of the price increase, the associated time advantages and the corresponding increase in the cost of goods sold helped the company to record a higher margin. The company also benefited from a favorable product mix in the quarter as it achieved stronger sales in the higher-margin rooftop category.
As a percentage of net sales, the SG&A expenses remained unchanged compared to the previous year. Adjusted EBITDA increased 12.9% and the Adjusted EBITDA margin increased 120 basis points year over year due to strong measures to control operating costs.
In fiscal 2020, Beacon had cash and cash equivalents of US $ 624.6 million, compared to US $ 72.3 million at the end of fiscal 2019. Long-term debt – minus the current portion – was 2 in line with the previous year. $ 5 billion.
Cash flow from operating activities for fiscal 2020 was $ 479.3 million compared to $ 212.7 million a year earlier.
Highlights of the 2020 financial year
Net sales decreased 2.3% year over year to $ 6,943.9 million. Sales of roof products for residential buildings rose by 0.6%, sales of roof products for non-residential buildings by 3.4% and sales of complementary products by 5.3% compared to the previous year. The gross margin increased by 10 basis points to 24.5% compared to the previous year. The company reported adjusted net income of $ 190.1 million, down from $ 176.2 million in 2019.
How have the estimates moved since then?
It turns out that last month’s review of estimates has seen an upward trend. The consensus estimate has shifted 25.51% due to these changes.
Currently, Beacon Roofing has an average growth value of C, but the Momentum Score does a little better with a B. In a similar way, the stock was given a rating of C on the value side, putting it in the mid-20% for this investment strategy.
Overall, the stock has an aggregated VGM value of B. Unless your focus is on one strategy, that value is the one you should be interested in.
Estimates for the stock are trending up, and the extent of these revisions looks encouraging. It’s no surprise that Beacon Roofing has a Zacks Rank 1 (Strong Buy). We expect the share to generate above-average returns over the next few months.
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Originally published December 19, 2020, 8:30 a.m.