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Gibraltar (ROCK) Shares Up More Than 14% on Q3 Earnings Beat

Zacks Equity Research

Gibraltar Industries, Inc.’s ROCK shares gained more than 14% on Oct 25 after it reported third-quarter 2019 results. The company’s earnings and sales not only topped analysts’ expectation but also rose year over year on solid growth across its business.

The company’s adjusted earnings of 95 cents per share beat the Zacks Consensus Estimate of 87 cents by 9.2%. The bottom line also increased 33.8% year over year on increased profitability in Renewable Energy & Conservation and Industrial and Infrastructure Product segments along with excellent operational actions and lower interest expenses..

Also, net sales of $299.2 million beat the consensus mark of $289 million by 3.5%. On a year-over-year basis, the top line increased 6.8% out of which 4.3% came from growth in Renewables & Conservation business (fully organic) and the remaining 2.5% resulted from acquisitions of SolarBOS and Apeks Supercritical. Revenues from Residential Products and Industrial & Infrastructure Products were almost flat year over year.

Markedly, the company’s backlog was $241 million (as of Sep 30, 2019), up 45% year over year. The uptick was mainly driven by three businesses — Renewable Energy, Conservation and Infrastructure.

Segmental Details

Residential Products: Net sales in the segment inched up 0.4% year over year to $126.3 million during the quarter. Modest increase in volumes was partly offset by market price.

Gibraltar Industries, Inc. Price, Consensus and EPS Surprise

 

Gibraltar Industries, Inc. Price, Consensus and EPS Surprise
Gibraltar Industries, Inc. Price, Consensus and EPS Surprise

Gibraltar Industries, Inc. price-consensus-eps-surprise-chart | Gibraltar Industries, Inc. Quote

 

Adjusted operating margins contracted 130 basis points (bps) to 16.2%. The downside was mainly caused by material cost alignment and unfavorable product mix, which was offset by benefits from restructuring and 80/20 simplification initiatives.

Industrial and Infrastructure Products: Sales in the segment increased nearly 1% year over year to $56.2 million. The rise was supported by higher volume in its infrastructure business. However, it was partially offset by lower volumes in the Industrial business, wherein lower steel prices affected the company’s core products.

Adjusted operating margins expanded 180 bps to 10.2%, backed by a more favorable mix of higher margin products, increased 80/20 focus on more profitable product lines and customers as well as consistent efforts to reduce operating costs.

Renewable Energy and Conservation: Quarterly net sales in the segment rose 18.6% year over year (11.3% on an organic basis) to $116.8 million. The uptick can be attributed to strong demand for its commercial greenhouse growing solutions and contribution from the acquisitions of SolarBos (made in the year-ago quarter) and of Apeks Supercritical (in the third quarter). Meanwhile, segment backlog grew 72% year over year on strong end-market activity and enhanced new business bidding activities.

Adjusted operating margins of 17.8% were up 270 bps on better operating execution, volume leverage as well as favorable product and vertical market mix.

Costs and Margins

Gross margin came in at 25.6%, up 50 bps year over year.

Selling, general and administrative expenses increased 10.5% year over year to $45.2 million. As a percentage of sales, the metric increased 50 bps year over year. Adjusted operating margin of 13.3% expanded 120 bps year over year.

Balance Sheet and Cash Flow

As of Sep 30 2019, Gibraltar had cash and cash equivalents worth $137.6 million compared with $297 million at the end of 2018.

In the first nine months of 2019, the company provided $72.5 million cash from operating activities compared with $38.2 million in the year-ago period.

Guidance

Gibraltar narrowed its revenues and earnings guidance for 2019 to the upper end of the previously stated range. Gibraltar now expects 2019 consolidated revenues in the range of $1,040-$1,050 million. The company projects adjusted earnings in the range of $2.48-$2.55 per share compared with $2.40-$2.55 expected earlier. Adjusted operating income is expected in the range of $110-$113 million compared with prior projection of $110-$117 million. Adjusted operating margin is expected in the range of 10.6-10.8% compared with 10.6-11.1% expected earlier.

For fourth-quarter 2019, Gibraltar anticipates revenues in the range of $251-$261 million that indicates a rise from $240.9 million reported in the year-ago quarter. Adjusted earnings are projected in the band of 52-59 cents per share, which suggests a rise from 47 cents reported in the year-ago quarter.

Zacks Rank & Other Key Picks

Currently, Gibraltar currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the Zacks Building Products – Miscellaneous industry are Aegion Corporation AEGN, Construction Partners, Inc ROAD and Quanex Building Products Corporation NX, each sporting a Zacks Rank #1.

Aegion has three-five year expected earnings per share growth rate of 10%

Construction Partners has a solid earnings surprise history, having surpassed estimates in two of the trailing four quarters with the average being 9.2%.

Quanex’s current-year earnings are expected to rise 41.5%.

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