Gibraltar (ROCK) Q2 Earnings & Net Sales Beat, Shares Up
Gibraltar Industries, Inc. ROCK reported solid earnings in second-quarter 2023. Quarterly earnings surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. Although net sales decreased from the previous year, it beat the consensus mark.
The company’s quarterly results reflect organic growth, improving solar module supply, increased volume, accretive 80/20 initiatives, better price and cost alignment, along with supply-chain optimization initiatives, and improvement in project management systems. Gibraltar is optimistic about its upcoming growth prospects with its solid end market fundamentals backed by increased backlog levels sequentially, as well as, year over year. Backed by the aforementioned tailwinds, ROCK increased its 2023 adjusted earnings per share (EPS) outlook.
Shares of the company rose 9.9% on Aug 2 post the earnings release. Investors might have had bullish sentiments upon the company’s increased 2023 adjusted EPS guidance.
Inside the Headlines
Gibraltar reported adjusted earnings of $1.18 per share, surpassing the Zacks Consensus Estimate of adjusted earnings of 97 cents per share by 21.7% and increasing 22.9% year over year. This was driven by solid execution in all its operating segments.
Gibraltar Industries, Inc. Price, Consensus and EPS Surprise
Gibraltar Industries, Inc. price-consensus-eps-surprise-chart | Gibraltar Industries, Inc. Quote
Net sales of $364.9 million outpaced the consensus mark of $351 million by 3.8% but decreased 0.5% from the prior-year level of $366.9 million. The decline was due to the market price adjustments in the Residential segment, project delays in the Renewables and Agtech segments concerning solar module availability, project permitting, and project rescoping as well as continuous channel inventory right-sizing. These headwinds were partially offset by organic growth in the Residential and Infrastructure segments and the acquisition of Quality Aluminum Products. On an adjusted basis, the top line remained flat year over year at $364.1 million.
Segmental Details
Renewable Energy: Net sales in the segment decreased 23.6% from the year-ago quarter to $77.5 million wherein our model expected the segmental net sales to decline 10.1% to $91.3 million year over year. The solar module supply and delay in local permits affected project timing of contracted as well as active projects. Nonetheless, there are continuous improvements in module supply as additional module importers are coming up with the importation of the Uyghur Forced Labor Prevention Act learning curve. The order backlog was up 16.7% sequentially and 6.3% year over year.
The adjusted operating margin of 11.7% expanded 470 basis points (bps) year over year, driven by efficient execution across the business. The adjusted EBITDA margin increased 550 bps from the prior-year quarter to 14.8%.
Residential Products: Net sales in the segment were up 14% year over year to $228.2 million. This segment’s reported figure is up from our prediction of $196.6 million, which suggested a 1.8% decline from the prior year. Organic sales growth and the acquisition of Quality Aluminum Products or QAP backed the uptrend, offsetting the year-over-year impact of market price adjustments made in prior quarters. QAP contributed 12.7% and organic sales contributed 1.3% to net sales growth.
The adjusted operating margin of 19.3% expanded 80 bps in the quarter. The adjusted EBITDA margin increased 90 bps from the prior-year quarter to 20.5%.
Agtech: Sales declined 19.9% year over year to $35 million and adjusted sales fell 16.1% to $34.3 million. For this segment, we expected net sales as well as the adjusted sales to decline year over year by 3.9% to $42 million and by 2.7% to $39.8 million, respectively. The model’s value suggested higher sales value compared to the reported value. The downside was due to customer delays in project starts in the commercial business. Backlogs were up 16.2% sequentially.
The adjusted operating margin improved 280 bps year over year to 9.5%. The adjusted EBITDA margin was up 350 bps year over year to 12.9%.
Infrastructure: Sales in the segment rose 12.6% year over year to $24.2 million compared to the model’s prediction of $22.2 million, which indicated a 3.3% year-over-year increase. Backlog rose 46.1% year over year on strong end markets demand.
The adjusted operating margin of 24.1% expanded by a whopping 1,070 bps year over year. The adjusted EBITDA margin also expanded 1,030 bps from the prior-year quarter to 27.6%.
Operating Highlights
Adjusted operating profit also grew 18% to $51 million. The adjusted operating margin expanded 210 bps year over year to 13.9%.
Adjusted EBITDA rose 18% to $61 million in the reported period. The adjusted EBITDA margin also increased 250 bps from the prior year to 16.7%.
Balance Sheet & Cash Flow
As of Jun 30, 2023, Gibraltar had liquidity of $403 million, including cash and cash equivalents worth $18.6 million, up from $17.6 million at 2022 end. Long-term debt was $9.8 million, down from $88.8 million as of Dec 31, 2022.
As of the first six months of 2023, net cash provided by operating activities totaled $114.1 million, compared with $0.5 million in the prior year. In the second quarter of 2023, the company repurchased 368,038 shares for $17.8 million at an average price of $48.40 per share.
Raised EPS & Retained Net Sales 2023 Guidance
Gibraltar expects revenues of $1.36-$1.41 billion, whereas it reported revenues of $1.38 billion in 2022.
Adjusted earnings are now expected to be $3.90-$4.10 per share (previously expected $3.46-$3.66 per share), suggesting a rise from adjusted earnings of $3.40 per share reported in 2022.
Zacks Rank
Gibraltar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Few Recent Construction Releases
Masco Corporation MAS reported robust results for second-quarter 2023 wherein earnings and revenues surpassed the Zacks Consensus Estimate. Furthermore, earnings increased year over year while revenues declined. Strong pricing actions and operational efficiency helped deliver solid results, which were partially offset by lower volumes.
MAS focused on a balanced capital deployment strategy. The company returned $89 million to shareholders via dividends and share repurchases and announced a strategic bolt-on acquisition of Sauna360 Group Oy, which will expand its spa and wellness product offerings.
Otis Worldwide Corporation’s OTIS second-quarter 2023 earnings and sales surpassed the Zacks Consensus Estimate. Its quarterly results reflected the 11th consecutive quarter of organic sales growth and solid operating margin expansion, contributing to mid-single-digit adjusted EPS growth.
The company remains focused on strong portfolio growth and aims to generate a solid New Equipment backlog. It also intends to expand operating margins, return cash to shareholders through a capital-allocation strategy and pursue additional progress toward ESG goals.
Armstrong World Industries, Inc. AWI reported mixed results for second-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate but net sales missed the same. Both metrics increased on a year-over-year basis.
AWI’s results were backed by robust growth in operating income and adjusted EBITDA, as well as expanded margins, and fueled by positive performances from both the Mineral Fiber and Architectural Specialties segments. The company remains focused on advancing digital and healthy space initiatives and pursuing attractive, bolt-on acquisitions.
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