Gibraltar Industries (ROCK) Up 11.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Gibraltar Industries (ROCK). Shares have added about 11.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Gibraltar Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Gibraltar Q4 Earnings & Revenues Miss Estimates
Gibraltar Industries, Inc. reported fourth-quarter 2023 results, wherein quarterly earnings and net sales missed the Zacks Consensus Estimate. On a year-over-year basis, the top and the bottom lines increased.
The company’s quarterly results reflect organic growth, increased volume, improving customer and product mix, accretive 80/20 initiatives, better price and cost alignment, along with supply-chain optimization initiatives and improvements in project management systems. Gibraltar is optimistic about its upcoming growth prospects with its robust end-market fundamentals, backed by increased backlog levels.
Backed by solid end market fundamentals, improving business conditions in Renewables and Agtech markets, and an efficient operating engine, ROCK is well-poised to deliver strong results in 2024.
Inside the Headlines
Gibraltar’s adjusted earnings of 85 cents per share missed the Zacks Consensus Estimate of 86 cents by 1.2%. On the other hand, the metric grew 18.1% year over year.
Net sales of $328.8 million also lagged the consensus mark of $335.5 million by 2% but increased 4.7% from the prior-year level of $313.9 million. Benefits received from solid execution in Residential and Infrastructure segments, and increasing order backlog levels were partially offset by lingering industry headwinds faced by Renewables and Agtech segments. On an adjusted basis, the top line grew 5.1% year over year compared with the prior-year adjusted net sales of $312.9 million.
Segmental Details
Renewables: Net sales in the segment increased 1.9% from the year-ago quarter to $87.7 million. This was driven by backlog converting to sales as customers continued to work through challenges related to permitting delays and awaited final tax credit guidance from the Inflation Reduction Act. The backlog was up 20.9% year over year.
The adjusted operating margin of 13.1% contracted 210 basis points (bps) year over year. The adjusted EBITDA margin decreased 210 bps from the year-ago quarter to 15.8%.
Residential: Net sales in the segment were up 4.3% year over year to $179.3 million. This was backed by a 3.1% increase in organic sales driven by participation gains and volume, partially offset by pricing adjustments related to commodity deflation. Also, improved price/cost alignment, volume and 80/20 initiatives aided the uptrend.
The adjusted operating margin of 17.5% expanded a whopping 410 bps in the quarter. The adjusted EBITDA margin gained 410 bps from the year-ago quarter to 19.2%.
Agtech: Net sales increased 10.1% and adjusted net sales gained 12.8% year over year to $42.4 million.
The adjusted operating margin fell 790 bps year over year to 3.3%. The adjusted EBITDA margin was negative 1% compared with7.6% reported a year ago.
Infrastructure: Sales in the segment rose 12.1% year over year to $19.4 million, driven by solid end-market demand and market participation gains. Backlog rose 3% year over year on strong demand.
The adjusted operating margin of 18.6% expanded 490 bps year over year. The adjusted EBITDA margin also expanded 460 bps from the year-ago quarter to 23.1%.
Operating Highlights
Adjusted operating profit grew to $34.4 million from $31.3 million reported in the prior year. The adjusted operating margin expanded 50 bps year over year to 10.5%.
Adjusted EBITDA rose 8.7% to $43.6 million in the reported period. The adjusted EBITDA margin also increased 50 bps from the prior year to 13.3%.
2023 at a Glance
In the full year, Gibraltar reported net sales of $1.38 billion, down from $1.39 billion reported in 2022. Adjusted earnings during the year were $4.11 per share, up from $3.40 reported in 2022.
Adjusted operating margin increased 180 bps to 12.7%, year over year. The adjusted EBITDA margin of 15.4% was up 210 bps from the prior year.
Balance Sheet & Cash Flow
As of Dec 31, 2023, Gibraltar had liquidity of $495 million, including cash and cash equivalents worth $99.4 million compared with $17.6 million at 2022 end. There was no long-term debt at the end of fourth-quarter 2023 against $88.8 million as of Dec 31, 2022.
In 2023, net cash provided by operating activities totaled $218.5 million compared with $102.7 million in the prior year. Free cash flow was up 15% to $205 million in the reported year.
2024 Guidance
Gibraltar expects net sales of $1.43-$1.48 billion for 2024. Adjusted earnings are expected to be $4.57-$4.82 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.3% due to these changes.
VGM Scores
At this time, Gibraltar Industries has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Gibraltar Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Gibraltar Industries belongs to the Zacks Building Products - Miscellaneous industry. Another stock from the same industry, Armstrong World Industries (AWI), has gained 3.4% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Armstrong World Industries reported revenues of $312.3 million in the last reported quarter, representing a year-over-year change of +2.6%. EPS of $1.22 for the same period compares with $1.08 a year ago.
For the current quarter, Armstrong World Industries is expected to post earnings of $1.21 per share, indicating a change of +8% from the year-ago quarter. The Zacks Consensus Estimate has changed +4.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Armstrong World Industries. Also, the stock has a VGM Score of D.
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