Beacon's (BECN) Q4 Earnings & Revenues Miss, Margin Falls
Beacon Roofing Supply, Inc. BECN reported lower-than-expected results for fourth-quarter 2022. Both earnings and revenues missed the respective Zacks Consensus Estimate after beating in the preceding four quarters. Revenues increased but earnings declined on a year-over-year basis.
Julian Francis, Beacon’s president and CEO, said, “We finished the year with strong results including the highest fourth quarter and full year sales, net income and Adjusted EBITDA in Beacon’s history. We also accelerated greenfield investments, adding 16 locations during the year in key markets creating capacity and expanding our branch footprint. I am pleased to report that we finished the year with strong cash generation and enter 2023 with ample capacity to deploy capital to both growth initiatives and shareholder returns.”
Shares of the company jumped 5.4% in the after-hours trading session on Feb 23, after the earnings release.
Earnings & Revenue Discussion
This distributor of residential and non-residential roofing materials reported adjusted earnings of $1.14 per share, which missed the consensus mark of $1.21.
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 $1.97 billion missed the consensus mark of $1.98 billion by 0.6%. The top line grew 12.2% on a year-over-year basis driven by increased sales across all three lines of business, complemented by the higher pricing. Higher demand for residential roofing and complementary products also contributed to growth.
During the quarter, the weighted-average selling price increased 17-18% and volumes reduced 6-7%.
Sales According to Line of Business
Residential Roofing Product: For the reported quarter, sales of this product (comprising 49.1% of the quarterly net sales) were $967.1 million, up 5.1% from the prior year.
Non-Residential Roofing Product: Sales (comprising 28.6% of the quarterly net sales) increased 25.2% from the year-ago quarter to $562.6 million.
Complementary Product: For the quarter, sales of this product (comprising 22.3% of the quarterly net sales) increased 14% year over year to $439.7 million.
The gross margin of 26.2% was down 10 basis points (bps) year over year on increased product cost and non-residential product sales mix, which were overshadowed by higher average selling prices for the products. As a percentage of net sales, adjusted operating expenses increased to 18.5% from 17.5% a year ago, owing to increased employment, incentive compensation and inflation.
Adjusted EBITDA increased 2.5% on a year-over-year basis to $178.5 million, driven by higher net sales and a decline in the numbers of outstanding shares. Adjusted EBITDA margin contracted 80 bps year over year to 9.1%.
Other Financial Details
As of Dec 31, 2022, the company had cash and cash equivalents of $67.7 million compared with $225.8 million at 2021-end. Long-term debt, net was $1.606 billion, slightly down from $1.612 billion at 2021-end.
Net cash provided by operating activities was $401.1 million compared with $166.7 million a year ago.
In 2022-end, net sales increased 23.6% to $8.43 billion from $6.82 billion in 2021-end.
Product sales in businesses – residential roofing product, non-residential roofing product and complementary product – increased 17.5%, 41.6% and 17.3%, respectively.
Gross margin declined to 26.5% from 26.7% in the prior year as price-cost improvement was overshadowed by a higher non-residential product sales mix. Adjusted operating expense, as a percentage of net sales, declined 80 bps to 17% than the prior year.
Adjusted EBITDA increased 32.7% to $910 million in 2022 from $685.9 million in 2021. Adjusted EBITDA margin expanded 70 bps to 10.8% compared to the previous year.
First-Quarter 2023 Outlook
In the first quarter of 2023, the company expects net sales to increase approximately 5% on a year-over-year basis. The gross margin is expected to be 25.5%.
Net sales growth is anticipated to be between 2% and 4% for 2023.
Adjusted EBITDA is expected to be in the range of $810 million – $870 million.
Continuous investments in greenfield locations are expected to yield 15 new locations in 2023. The company expects to repurchase $500 million worth shares.
Zacks Rank & Key Picks
Beacon currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail-Wholesale sector are:
Chuy's Holdings, Inc. CHUY currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 50% in the past six months.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 10.8% and 16.1%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados Holdings Inc. ARCO carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 11.6%. Shares of the company have increased 17.9% in the past three months.
The Zacks Consensus Estimate for ARCO’s 2023 sales and EPS suggests growth of 8.1% and 4.2%, respectively, from the year-ago period’s levels.
Brinker International, Inc. EAT carries a Zacks Rank #2. EAT has a long-term earnings growth rate of 7.1%. The stock has increased 39.4% in the past six months.
The Zacks Consensus Estimate for EAT’s fiscal 2024 sales and EPS suggests growth of 3.9% and 36.5%, respectively, from the year-ago period’s reported levels.
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