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Patrick Industries (PATK) to Report Q4 Earnings: What's Up?

Zacks Equity Research

Patrick Industries, Inc. PATK is scheduled to report fourth-quarter 2018 results on Feb 14, before the opening bell. In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 10.6%. In fact, the stock has a strong record of earnings surprises, having surpassed the Zacks Consensus Estimate in all the trailing seven quarters.

Meanwhile, in the third quarter, the top and bottom lines of this major manufacturer and distributor of building and component products for recreational vehicle (“RV”), marine, manufactured housing (“MH”), and industrial markets grew a solid 41% and 60%, respectively, given growth in marine, MH and industrial markets, acquisitions, geographic and product expansion efforts, along with market share gains.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release. The Zacks Consensus Estimate for the quarter to be reported is pegged at 75 cents, trending downward from 85 cents over the past 60 days. Also, this reflects a decline of 13.8% from 87 cents reported in the year-ago quarter. That said, revenues are expected to be $535 million, up 12.5% year over year.

Patrick Industries, Inc. Price and EPS Surprise

 

Patrick Industries, Inc. Price and EPS Surprise | Patrick Industries, Inc. Quote

Factors That Might Influence Upcoming Results

The fourth quarter is expected to benefit from its growth initiatives, in turn likely to drive both strategic and organic revenue growth. The company’s four primary markets (namely RV, marine, MH and industrial) are supported by strong industry fundamentals including favorable demographics, lifestyle and employment growth trends, high consumer confidence rate, credit availability, as well as a healthy housing market, which support its leverageable model based on slow and steady growth.

With strong demand patterns in its core markets outside of RV, Patrick Industries is expected to generate higher organic revenues in the fourth quarter despite reduced expectation of RV shipments in the quarter and adjusting for lower operating days in its fiscal calendar. Meanwhile, the company anticipates mid- to high-single-digit decline in RV shipments in the fourth quarter.

Notably, the fourth quarter had five days less than the corresponding period in 2017. Hence, fourth-quarter revenues will be impacted by approximately $40-$50 million.

Its net sales increased 49% year over year in the first nine months of 2018, supported by revenues from the RV industry, which represented 65% of net sales, increasing 41% from a year ago.

Patrick Industries’ sales from the marine industry (representing 11% sales in the first nine months of 2018) surged 153% from the corresponding period of 2017. Revenues from the MH industry (12% of sales) rose 35%, as wholesale unit shipments in this industry increased about 9% during the period.  Again, revenues from the industrial market (12% of sales) increased 58% from the year-ago period.

The company continues to have an extremely strong pipeline of acquisitions, representing all its primary markets. It completed eight acquisitions through the first nine months of 2018, accounting for more than $330 million of annualized revenues.

Encouragingly, Patrick Industries was able to expand its gross margin (up 130 basis points year over year in the first nine months of 2018), via leveraging fixed costs and realizing synergies amid modest input-cost headwinds. The company’s current business model and recent acquisitions have helped it generate robust operating cash flows, which will aid Patrick Industries in supporting its strategic growth plans.

Here is What Our Quantitative Model Predicts:

Our proven model shows that Patrick Industries is unlikely to beat on earnings in the to-be-reported quarter. 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.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Patrick Industries currently has a Zacks Rank #4 (Sell). Notably, we caution against stocks with a Zacks Rank #4 and 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

Here are some construction companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Toll Brothers, Inc. TOL has an Earnings ESP of +1.91% and a Zacks Rank #2.

Taylor Morrison Home Corporation TMHC has an Earnings ESP of +1.29% and a Zacks Rank #2.

Forterra, Inc. FRTA has an Earnings ESP of +8.99% and a Zacks Rank #2.

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