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Beacon's (BECN) Q2 Earnings and Revenues Trump Estimates

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Beacon Roofing Supply, Inc. BECN posted impressive second-quarter fiscal 2021 results. Earnings and revenues surpassed the respective 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, “Our quarterly results, coupled with the successful divestiture of our Interior Products business, have allowed us to significantly reduce leverage, strengthen our balance sheet and sharpen our focus on the growth and profitability of our exteriors business. We are excited about our progress and look forward to a very successful 2021 as we continue to help our customers build more."

Quarter in Detail

Beacon reported adjusted earnings of 23 cents per share, which topped the consensus mark of 1 cent. In the year-ago period, it incurred a loss of 27 cents a share. Higher revenues and aggressive cost-cutting actions aided the bottom line. Solid residential backdrop and gross margins backed by pricing execution, mix as well as timing bode well. These were partly offset by increased incentive compensation and benefits cost.

Net sales of $1,318 million surpassed the consensus mark of $1,317 million and grew 10.1% year over year on positive contribution from residential roofing as well as complementary products. Also, higher pricing added to the positives, offset by softer demand from non-residential categories.

Sales of residential roofing (accounting for 52.7% of net sales) and complementary products (22.3%) grew 18.7% and 9.4%, respectively, while that of non-residential roofing products (25%) declined 4.1%.

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

Operating Highlights

Gross margin of 25.3% improved 270 basis points (bps) year over year for the quarter, courtesy of successful implementation of price increase. Cost-saving efforts and productivity initiatives helped the company bring down operating expenses, thereby driving margins.

As a percentage of net sales, SG&A expenses contracted to 20.3% or 170 bps. Adjusted EBITDA grew 236.7% and adjusted EBITDA margin expanded 380 bps year over year, reflecting strong demand as well as implementation of cost-control strategies.

Cash Position

At fiscal second quarter-end, Beacon had cash and cash equivalents of $619.3 million, down from $624.6 million at fiscal 2020-end. Long-term debt — net of current portion — was $2.08 billion, lower than the fiscal 2020-end figure of $2.49 billion.

Cash used in operating activities was $123.1 million for the first six months of fiscal 2021 versus $150.8 million in the comparable year-ago period.

Zacks Rank

Beacon — which shares space with Builders FirstSource, Inc. BLDR, Fastenal Company FAST and Lumber Liquidators Holdings, Inc. LL 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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