Caesarstone (CSTE) Q2 Loss Wider Than Expected, Revenues Miss
Caesarstone Ltd. CSTE reported lackluster second-quarter 2023 results, with earnings and revenues missing the Zacks Consensus Estimate. The company not only reported lower revenues, it also reported a loss in the second quarter compared with the year-ago figure. This is the sixth consecutive quarter of earnings and revenues miss. Lower revenues, manufacturing unit expenses, temporary production inefficiencies, elevated input costs and higher impairment and restructuring expenses led to weak performance.
Earnings & Revenue Discussion
In the quarter under review, the company reported loss per share of 69 cents missing the Zacks Consensus Estimate of a loss of 8 cents. In the prior-year quarter, the company reported earnings per share of 20 cents.
In the second quarter, total revenues of $143.7 million missed the Zacks Consensus Estimate of $160 million. The top line decreased from $180.3 million a year ago. On a constant-currency basis, second-quarter revenues were down 18.4% year over year. The downside was due to lower volume, given global economic headwinds, mainly in renovation and remodeling channels, across the company’s main regions and the competitive landscape.
Caesarstone’s adjusted gross margin declined to 9.6% in the second quarter from 26.4% a year ago. The negative aspect stemmed from reduced revenues and escalated manufacturing unit expenses resulting from diminished absorption of fixed costs, primarily linked to decreased capacity utilization and the shutdown of the Sdot-Yam facility. Additionally, temporary production inefficiencies, an adjustment in inventory valuation, and elevated input costs for sold products contributed to the downside.
Operating expenses in the quarter were 40.9% of revenues, higher than 22.8% in the prior-year quarter due to higher impairment and restructuring expenses.
Owing to the above-mentioned headwinds, the company incurred an operating loss of $46.9 million in the quarter against operating earnings of $6.4 million a year ago.
Adjusted EBITDA was a loss of $13.4 million in the second quarter against adjusted EBITDA of $17.1 million a year ago.
Caesarstone Ltd. Price, Consensus and EPS Surprise
Caesarstone Ltd. price-consensus-eps-surprise-chart | Caesarstone Ltd. Quote
Other Financial Information
As of Jun 30, 2023, the company had cash and cash equivalents, short-term bank deposits and short-term marketable securities of $57.3 million compared with $59.2 million as of Dec 31, 2022. In the second quarter, the company achieved a favorable operational cash flow of $17.2 million, primarily propelled by inventory reductions. This contrasts with a cash utilization of $4.5 million in the second quarter of 2022. Total debt to financial institutions was $8.3 million at the second-quarter end.
Zacks Rank
Caesarstone currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some Recent Construction Releases
Quanta Services Inc. PWR reported mixed results for second-quarter 2023, wherein adjusted earnings missed the Zacks Consensus Estimate but revenues surpassed the same. Both metrics were up on a year-over-year basis.
Quanta continues to experience high demand for its infrastructure solutions that support energy transition initiatives and increase reliability, safety and efficiency. Project activity associated with renewable generation has been going strong and is expected to continue throughout the year.
KBR, Inc. KBR reported mixed second-quarter 2023 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus estimate for the seventh straight quarter. Revenues, on the other hand, surpassed the mark in three of the trailing seven quarters and missed on other four occasions.
Although KBR’s quarterly earnings were impacted by losses related to convertible notes and a legacy legal matter, the company delivered a strong quarter of financial performance and environmental, social and governance or ESG performance, underpinned by its mission focus and operational discipline.
Fluor Corporation FLR reported stellar results for second-quarter 2023, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate and increased from the previous year, given solid demand for its engineering and construction solutions.
Given the strong underlying performance of the company’s non-legacy portfolio and large Energy Solutions projects, Fluor lifted its expectations for 2023.
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