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Beacon (BECN) Rallies as Q1 Earnings Top Estimates, Rise Y/Y

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Zacks Equity Research
·4 min read
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Beacon Roofing Supply, Inc. BECN posted impressive first-quarter fiscal 2021 results. The bottom line surpassed the Zacks Consensus Estimate, mainly backed by solid residential backdrop, stronger gross margins and reduced operating expenses.

Julian Francis, Beacon’s president and chief executive officer, said, “First quarter results represent an impressive example of the underlying potential of our company.”

As the company reported better-than-expected results for first-quarter 2021, shares of this largest distributor of residential and non-residential roofing materials gained 3.6% in the after-market trading session on Feb 8.

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise
Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

Beacon Roofing Supply, Inc. price-consensus-eps-surprise-chart | Beacon Roofing Supply, Inc. Quote

Quarter in Detail

Beacon reported adjusted earnings of 92 cents per share, which topped the consensus mark of 64 cents by 43.8%. In the year-ago period, it recorded earnings of 32 cents a share. Despite low revenues, aggressive cost-cutting actions aided the bottom line. Solid residential backdrop and gross margins backed by pricing execution, mix and timing bode well.

Net sales of $1,576.5 million, missed the consensus mark of $1,751 million by 9.9% but grew 11.4% year over year on positive contribution from residential demand within product categories, offset by softer demand from non-residential categories.

Sales of residential roofing products (accounting for 53.6% of net sales) grew 21.2% and complementary products (21.1%) rose 8.8%, while non-residential roofing products (25.3%) declined 3.3%.

Operating Highlights

Gross margin of 25.4% improved 140 basis points (bps) year over year for the quarter. Successful implementation of price increase, timing benefits related to the same and corresponding increase in the cost of goods sold helped drive margin. Cost-saving efforts and productivity initiatives helped the company bring down operating expenses, thereby driving its margins.

As a percentage of net sales, SG&A expenses contracted to 16.8% or 250 bps. Adjusted EBITDA grew 85.8% and adjusted EBITDA margin also expanded 370 bps year, reflecting strong demand and implementation of cost-control strategies.

Cash Position

At the end of first-quarter 2021, Beacon had cash and cash equivalents of $461.4 million, down from $624.6 million at fiscal 2020-end. Long-term debt — net of current portion — was $2.5 billion, in line with the fiscal 2020-end figure.
Cash used in operating activities was $39.1 million for the fiscal first quarter versus $125.3 million a year ago.

Fiscal Q2 Guidance

For the fiscal second quarter (ending in March), the company expects total sales growth in the mid to high-single digits despite one lesser selling day than second-quarter fiscal 2020.

Owing to seasonality, the company saw a drop in margins during the fiscal second quarter. Nonetheless, the company is confident that the impact is going to be lower than in recent years. Beacon also anticipates a year-over-year increase of nearly 200 bps in gross margin.

Fiscal 2021 Guidance

For fiscal 2021, the company expects sales from continuing operations to grow in the high single digit. Adjusted EBITDA is projected in the range of $500-$525 million for continuing operations, which reflects a significant increase from $399-million pro forma adjusted EBITDA for fiscal 2020. This improvement reflects strong sales growth, gross margin gains and favorable operating leverage.

Zacks Rank

Beacon Roofing — which shares space with Builders FirstSource, Inc. BLDR, Fastenal Company FAST and BMC Stock Holdings, Inc BMCH in the Zacks Building Products – Retail industry — 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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