Yahoo Finance Why Is TopBuild (BLD) Up 4.3% Since Last Earnings Report?
It has been about a month since the last earnings report for TopBuild (BLD). Shares have added about 4.3% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
TopBuild Q1 Earnings Top, Net Sales Miss, View Up
TopBuild reported mixed results for first-quarter 2024, wherein its earnings topped the Zacks Consensus Estimate but net sales missed the same.
Nonetheless, both earnings and net sales grew on a year-over-year basis. Notably, effective price realization during the quarter, combined with productivity initiatives, resulted in a 100 basis points (bps) expansion of the adjusted EBITDA margin.
Also, the company has revised its forecast for 2024 upward, considering the robust profitability observed in the first quarter and the integration of acquisitions completed so far in 2024.
Meanwhile, TopBuild declared that its board of directors had approved the repurchase of up to $1 billion of the company's outstanding common stock. This new authorization supplements the $154 million remaining from the previous approval, resulting in a total availability of $1.15 billion for share repurchases.
Inside the Headlines
The company’s adjusted earnings per share of $4.81 topped the consensus estimate of $4.56 by 5.5%. The bottom line increased 10.3% from the prior year’s $4.36.
Total net sales of $1.28 billion missed the consensus mark of $1.31 billion by 2.1% but increased 1.1% year over year. In the first quarter, its single-family installation business showed sequential improvement on a branch-to-branch comparison each month. Notably, March marked the first instance in a year where single-family installations exhibited year-over-year growth, which represents a highly positive development.
Segmental Performance
Installation sales increased 4.1% year over year to $798.7 million. Acquisitions and selling prices contributed 3.5% and 1.2% to sales, respectively. Volumes also contributed to sales by 0.3% year over year.
Growth was driven by the strength in the multi-family sector during the quarter, which grew more than 20% versus a tough comp from the prior year.
Adjusted operating margin for the quarter expanded 40 bps to 19.6%. Adjusted EBITDA margin improved 60 bps to 22% for the quarter.
Revenues of the Specialty Distribution segment declined 2.3% year over year to $545.8 million. Volumes reduced sales by 4.2% year over year. However, pricing and acquisitions contributed 1.5% and 0.4% to sales growth, respectively. We expected segmental net sales to be almost in line with the year-ago figure. The decrease in volume was primarily driven by reduced sales of residential insulation, attributed to changes in the business mix and constrained material supply of fiberglass.
Adjusted operating margin rose 90 bps from the year-ago level to 14.1%. Adjusted EBITDA margin also improved 110 bps to 16.9% for the quarter.
Operating Highlights
Adjusted gross margin of 30.3% expanded 110 bps, given improved productivity and higher pricing in both segments.
Adjusted SG&A expenses, as a percentage of revenues, grew 30 bps year over year at 13.5%. Nonetheless, the adjusted operating margin expanded 70 bps from the year-ago period to 16.8%.
Adjusted EBITDA grew 6.5% from the year-ago quarter to $253.8 million. Adjusted EBITDA margin improved 100 bps to 19.8% for the quarter.
Financial Update
As of Mar 31, 2024, cash and cash equivalents were $968.8 million, up from $848.6 million at 2023-end. Long-term debt was $1.36 billion, down from $1.37 billion at 2023-end.
For the first quarter, net cash provided by operating activities was $178.8 million, up from $169.8 million in the year-ago period.
2024 Guidance
TopBuild now expects net sales between $5.4 billion and $5.6 billion versus earlier expectations of $5.360-$5.560 billion. The estimated figure indicates an increase from $5.19 billion reported in 2023.
Adjusted EBITDA is now projected to be between $1.065 billion and $1.155 billion versus $1.04 billion-$1.13 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?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, TopBuild has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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 belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, Otis Worldwide (OTIS), has gained 6.6% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Otis Worldwide reported revenues of $3.44 billion in the last reported quarter, representing a year-over-year change of +2.7%. EPS of $0.88 for the same period compares with $0.80 a year ago.
For the current quarter, Otis Worldwide is expected to post earnings of $1.03 per share, indicating a change of +12% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Otis Worldwide. Also, the stock has a VGM Score of C.
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