GMS Likely to Report Tepid Earnings in Q1: Factors to Consider
GMS Inc. GMS is scheduled to report first-quarter fiscal 2024 results on Aug 31, before market open.
In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 10.5% and rose 1% year over year. Net sales topped the consensus mark by 2.6% and increased 1.2% year over year.
GMS’ earnings topped the consensus mark in 15 of the last 16 quarters.
The Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share moved down to $2.40 from $2.42 in the past seven days. The estimated figure indicates a 1.2% drop from the year-ago quarter’s level.
GMS Inc. Price and EPS Surprise
GMS Inc. price-eps-surprise | GMS Inc. Quote
The consensus mark for net sales is pegged at $1.37 billion, suggesting a 1% rise from the year-ago reported figure.
Key Factors to Note
GMS is likely to have generated lower earnings and year-over-year flat sales in the fiscal first quarter. Although repair and remodeling activities have recently increased, residential construction has faced challenges due to delayed housing construction, higher material and labor costs and highly volatile mortgage rates.
The solid pricing actions and acquisitions are expected to offset these pressures somewhat.
The company expects total net sales to be up in low-single-digits (on a per-day basis) for the quarter. Wallboard volumes are expected to be flat to down low single-digits year over year with high single-digits pricing growth. Volume is likely to be down 10-15% in single-family, offsetting high teen growth in Multi-family and mid-to-high single-digit rise in Commercial. The consensus mark for sales of Wallboard products is pegged at $553 million, up from $522 million a year ago.
Ceiling volume is expected to be down in the low single digits, but pricing is likely to be up in the low single digits. The Zacks Consensus Estimate for Ceiling products’ sales is pegged at $174 million, up from $167 million reported a year ago.
Steel Framing volume is projected to grow in low-to-mid teens but pricing is likely to decline by 25-30%. The consensus mark for Steel Framing is pegged at $214 million, reflecting a fall from $275 million year over year.
Volume and pricing is anticipated to be up in Complementary products in the fiscal first quarter. The consensus mark for Complementary products is pegged at $414 million, suggesting an increase from $396 million reported a year ago.
Per the consensus mark, Ceiling, Wallboard and Complementary products’ sales on an organic basis are likely to grow by 4%, 6% and 3%, respectively. The same for Steel Framing’s organic sales are likely to be down 22%.
GMS anticipates gross margin to be nearly 32% and adjusted EBITDA within $170-$175 million, indicating no changes from the year-ago period’s levels. Persistent inflationary pressure and labor woes might have ailed the company’s bottom line amid improved supply chain headwinds. This and deflationary steel prices and end market shift have been impacting GMS’ Steel Framing business.
What the Zacks Model Unveils
Our proven model doesn’t conclusively predict an earnings beat for GMS this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as elaborated below.
Earnings ESP: The company has an Earnings ESP of -1.25%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: GMS carries a Zacks Rank #2.
Recent Releases
Williams-Sonoma Inc. WSM reported mixed results in second-quarter fiscal 2023 (ended Jul 30, 2023). Earnings beat the Zacks Consensus Estimate but revenues missed the same. The metrics declined year over year. The downside was primarily due to the increasing promotional environment and softening industry metrics.
WSM anticipates fiscal 2023 net revenues to decline between 5% and 10%. The company now expects its operating margin to be 15-16% versus earlier expectations of 14-15%.
Builders FirstSource BLDR reported second-quarter 2023 results wherein earnings and net sales surpassed the Zacks Consensus Estimate. The company has exceeded expectations, thanks to a more stable housing environment, a strong value-added product portfolio and the positive impact of operational initiatives implemented in recent years.
However, on a year-over-year basis, the results were hampered by declining single-family starts and commodity deflation.
Darden Restaurants, Inc. DRI reported fourth-quarter fiscal 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The metrics increased on a year-over-year basis.
For fiscal 2023, DRI expects sales to be approximately $11.5-$11.6 billion. Same-restaurant sales in fiscal 2024 is anticipated in the range of 2.5-3.5%. EPS from continuing operations are anticipated in the band of $8.55-$8.85. Its mid-point of $8.7 is lower than the Zacks Consensus Estimate of $8.73.
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