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Gibraltar (ROCK) Stock Up on Q1 Earnings & Revenue Beat

Gibraltar Industries, Inc. ROCK reported better-than-expected first-quarter 2022 results despite the continuation of supply-chain issues impacting solar customers, the solar industry, and the Renewables business.

Following the results, the stock leaped 11.9% on May 4.

President and CEO of Gibraltar, Bill Bosway, stated, “Given our solid start to the year and current demand across the business, our outlook for the year remains unchanged. We expect our Renewables segment to improve in the second quarter and are working closely with customers to assess potential exposure to the Department of Commerce’s solar panel anti-circumvention investigation. We expect solid performance in our Residential segment as we continue to execute on demand, manage price/cost, and gain additional participation. We look for the Agtech segment’s performance to continue to improve as it executes on higher margin backlog and benefits from 80/20 and lean initiatives. We expect Infrastructure to have a solid year with favorable business mix, good volume, and improved efficiency in its operations.”

Notably, Gibraltar has classified the processing equipment business (which accounted for 10% of the Agtech segment’s 2021 revenues) as held-for-sale with first-quarter 2022 results. It has removed the related revenues and expenses of this business from its adjusted results.

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

Inside the Headlines

For the first quarter, Gibraltar reported adjusted earnings of 60 cents per share, beating the Zacks Consensus Estimate of 45 cents by 33.3% and increasing 11.1% year over year.

Quarterly net sales of $317.9 million surpassed the consensus mark of $301 million by 5.7%. The top line increased 10.5% year over year. Adjusted revenues (excluding Agtech revenue) grew 11.8%, driven by participation gains and price management in the Residential segment, partially offset by continued supply chain challenges in the Renewables segment. Notably, during the first quarter, Gibraltar decided to sell its Agtech processing equipment business.

The order backlog in 2021 was $433 million, up 23% year over year. The upside can be attributed to robust end-market demand and new order activity across the business.

Segmental Details

Renewable Energy: Net sales in the segment decreased 7.8% from the year-ago quarter’s levels to $78.8 million, as the industry-wide supply chain challenges continued to delay and disrupt the solar project. Also, severe weather in the Northeast, particularly in January and February, contributed to project delays and disruptions.

Nonetheless, robust end-market demand led to new bookings, thereby driving backlog up 41% during the quarter.

Adjusted operating margins contracted 1,280 basis points (bps) year over year to a negative 5.4%, owing to inefficient field project management associated with market supply disruptions and cost inflation on structural steel used in solar canopy projects.

Residential Products: Net sales in the segment increased 28% year over year to $179.5 million. This marked the seventh consecutive quarter of double-digit growth. The uptick can be attributed to price, volume and participation gains. Adjusted operating margins of 18.8% improved 240 bps in the quarter.

Agtech: Sales in the segment declined 9.2% year over year to $42.4 million thanks to persistent project delays related to sluggish production and process licensing in the cannabis businesses. Nonetheless, backlogs were up 18% from the year-ago levels, backed by market demand in Produce, Commercial, and Cannabis. Adjusted operating margins expanded 160 bps year over year to 6.3%.

Infrastructure: Sales in the segment rose 13.9% year over year to $17.2 million. The upside was driven by growth in fabricated products. However, order backlog dropped 7% year over year. Adjusted operating margins contracted 660 bps to 6.9%, as steel inflation impacted fixed-price projects, booked in 2020 and early 2021.

Costs & Margins

In the reported quarter, selling, general and administrative expenses decreased 7.5% year over year to $43.6 million. As a percentage of sales, the metric improved 270 bps year over year to 13.7%.

Adjusted operating margin improved 40 bps year over year to 8.5%. Adjusted EBITDA margin also contracted 740 bps from the prior year to 11.3%.

Balance Sheet & Cash Flow

As of Mar 31, 2022, Gibraltar had cash and cash equivalents worth $15.6 million compared with $12.8 million at 2021-end. Long-term debt was $42.4 million, up from $23.8 million a year ago.

In the quarter, net cash used in operating activities totaled $7.8 million compared with $3.2 million in the year-ago quarter.

2022 Guidance

Based on the ongoing business dynamics, Gibraltar still expects revenues of $1.38-$1.43 billion, suggesting year-over-year growth of 3-6.7%. The consensus estimate for 2022 revenues is currently pegged at $1.42 billion. Adjusted earnings are likely in the range of $3.20-$3.40 per share, indicating a 15.1-22.3% year-over-year rise. The consensus mark for the same is pegged at $3.27 per share.

Zacks Rank & Peer Releases

Gibraltar currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Armstrong World Industries, Inc. AWI reported unimpressive results in first-quarter 2022. The top and the bottom line missed their respective Zacks Consensus Estimate but increased on a year-over-year basis. The upside can be attributed to solid pricing actions and strong execution of growth opportunities in the Architectural Specialties segment and digital and Healthy Spaces initiatives.

Armstrong World noted that lower Mineral Fiber sales volumes and equity earnings, primarily due to reductions in distributor inventory levels, affected the results.

Masco Corporation MAS reported solid results in first-quarter 2022. The top and the bottom line surpassed the Zacks Consensus Estimate and improved on a year-over-year basis.

Masco’s quarterly results were mainly backed by solid demand for its products and operational efficiencies.

Owens Corning OC reported solid results for first-quarter 2022, with earnings and net sales surpassing their respective Zacks Consensus Estimate and increasing on a year-over-year basis.

Owens Corning’s solid quarterly results were backed by strong demand across the markets served, structural improvements and strategic investments.

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