Beacon (BECN) Q3 Earnings Beat Estimates, Adjusted EBITDA Up
Beacon Roofing Supply, Inc. BECN reported mixed results for third-quarter 2023, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis.
The upside was backed by strong demand from the non-discretionary repair and re-roofing market. The company capitalized on this demand, focusing on disciplined pricing, labor productivity and working capital management. Also, the emphasis on Ambition 2025 growth initiatives, strategic investments in greenfields and acquisitions drove top-line growth. The company also lifted its expectations for the year.
Shares of the company dropped 4.5% in the after-hours trading session on Nov 2, post the earnings release.
Earnings & Revenue Discussion
This distributor of building products reported adjusted earnings of $2.85 per share, which topped the consensus mark of $2.54 by 12.2% and increased 26.7% from the year-ago adjusted level of $2.25 per share.
Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise
Beacon Roofing Supply, Inc. price-consensus-eps-surprise-chart | Beacon Roofing Supply, Inc. Quote
For the quarter, net sales of $2,584.3 million missed the consensus mark of $2,591 million by 0.2%. The top line increased 7% on a year-over-year basis, driven by solid execution on the Ambition 2025 growth program, including acquisitions and opening of greenfield locations as well as solid pricing.
During the quarter, the weighted average selling price increased 0-1% and volumes increased 1-2%.
Sales According to Line of Business
Residential Roofing Product: In the reported quarter, sales of this product line (comprising 53.1% of quarterly net sales) were $1,372.8 million, up 13.6% from the prior year’s levels. The upside was primarily driven by higher volumes. Our model predicted the metric to be $1,285.9 million.
Non-Residential Roofing Product: Sales (comprising 26.1% of the quarterly net sales) declined 7.6% from the year-ago quarter to $675.2 million. Our estimate was $717.3 million.
Complementary Product: For the quarter, sales of this product line (comprising 20.8% of quarterly net sales) increased 12.7% year over year to $536.3 million. The upside was primarily driven by the acquisition of Coastal Construction Products. Our model predicted the metric to be $568.2 million.
Operating Highlights
The gross margin of 26% was down 10 basis points (bps) year over year due to higher product costs, majorly offset by higher average selling prices of the company’s products.
Adjusted EBITDA increased 8.9% on a year-over-year basis to $309.6 million, driven by higher net sales and operating leverage. Adjusted EBITDA margin expanded 20 bps year over year to 12%.
Other Financial Details
As of Sep 30, 2023, the company had cash and cash equivalents of $69.7 million compared with $67.7 million at 2022-end and $84.9 million Sep 2022-end. Long-term debt, net was $2,193.9 million, up from the 2022-end value of $1,606.4 million and $1,608 million as of Sep 30, 2022.
Net cash provided by operating activities was $525.7 million in the first nine months of 2023 versus $81.2 million net cash provided by operating activities in the prior year.
Q4 View
In the fourth quarter of 2023, the company expects net sales to increase in the range of 11-13% on a year-over-year basis. The gross margin is expected to be 25.5%.
2023 Guidance Raised
For 2023, net sales growth is anticipated to be between 4% and 6%.
Adjusted EBITDA is expected to be in the range of $910-$930 million compared with the prior expectation of $850 million to $890 million.
Continuous investments in greenfield locations are expected to yield 25 new locations in 2023.
Zacks Rank & Recent Retail-Wholesale Releases
Beacon Roofing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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