TopBuild (BLD) Q4 Earnings & Net Sales Beat, Margins Up
TopBuild Corp. BLD reported impressive results for fourth-quarter 2023. Its earnings and revenues surpassed the Zacks Consensus Estimate and improved year over year.
The 2023 performance of the company demonstrates a consistent enhancement and profitable expansion, notably in the commercial and industrial sectors. These sectors experienced 4.9% growth in the fourth quarter and 6.2% growth throughout 2023. President and CEO Robert Buck conveyed contentment regarding the company's adeptness in enhancing operational efficiencies and elevating sales and labor productivity. These efforts significantly bolstered revenue growth and margin expansion.
Inside the Headlines
The company’s adjusted earnings per share (EPS) of $4.69 topped the consensus estimate of $4.60 by 2%. The bottom line increased 6.6% from the prior year’s $4.40.
Total net sales of $1.29 billion beat the consensus mark of $1.28 billion by 0.2% and increased 1.7% year over year. However, total net sales on a same-branch basis declined 1% year over year.
TopBuild Corp. Price, Consensus and EPS Surprise
TopBuild Corp. price-consensus-eps-surprise-chart | TopBuild Corp. Quote
Segmental Performance
Installation (TruTeam) sales increased 3.8% year over year to $790.4 million. Acquisitions and selling prices contributed 5.1% and 2.4% to sales, respectively. However, volumes reduced sales by 3% year over year. Our model suggested the segment’s net sales to grow 4% to $791.4 million. Although single-family volume experienced a decline, this was outweighed by acquisitions, increased multi-family and commercial volume, and a slight uptick in prices.
Adjusted operating margin for the quarter expanded 30 basis points (bps) to 19%. Adjusted EBITDA margin improved 60 bps to 21.4% for the quarter.
Revenues of the Specialty Distribution (Service Partners) segment grew 0.2% year over year to $564.5 million. Volumes reduced sales year over year by 0.2%. However, pricing contributed 0.5% to sales growth. We expected segmental net sales to decline 1.1% to $557.1 million. The decrease in residential volumes was surpassed by robust commercial and industrial volumes, along with pricing strength.
Adjusted operating margin rose 50 bps from the year-ago level to 14.8%. Adjusted EBITDA margin also improved 80 bps to 17.5% for the quarter.
Operating Highlights
Adjusted gross margin of 30.4% expanded 70 bps on operational efficiencies and strong margins on Installations of multi-family and commercial projects.
Adjusted SG&A expenses, as a percentage of revenues, grew 40 bps year over year at 13.9%.
Nonetheless, adjusted operating margin expanded 30 bps from the year-ago period to 16.5%. We anticipated the metric to be 15.8% for the reported quarter.
Adjusted EBITDA grew 6% from the year-ago quarter to $251.6 million.
Adjusted EBITDA margin improved 80 bps to 19.6% for the quarter. The Zacks model suggested the metric to be 18.7% for the quarter under discussion.
2023 Highlights
Adjusted EPS was $19.73, reflecting an increase of 15.3% from the 2022 level. Net sales of $5.19 billion increased 3.7% from 2022. Adjusted operating margin expanded 120 bps to 17.3%. Adjusted EBITDA margin grew 140 bps year over year to 20.2%.
Financial Update
As of Dec 31, 2023, cash and cash equivalents were $848.6 million, up from $240 million at 2022-end. Long-term debt was $1.37 billion, down from $1.42 billion at 2022-end.
For 2023, net cash provided by operating activities was $849.4 million, up from $495.8 million in the year-ago period.
2024 Guidance
TopBuild expects net sales between $5.360 and $5.560 billion. The estimated figure indicates an increase from $5.19 billion reported in 2023.
Adjusted EBITDA is now projected to be between $1.04 billion and $1.13 billion. This suggests growth (considering the midpoint of the guided range) from $1.05 billion reported in 2023.
Zacks Rank & Recent Construction Releases
BLD currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sterling Infrastructure, Inc. STRL reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. Both the top and the bottom lines increased year over year.
The upside was driven by strong contributions from Sterling’s Transportation and Building Solutions segments, along with its strategic emphasis on higher margins.
Owens Corning OC reported better-than-expected results for fourth-quarter 2023. Both earnings and net sales surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.
Chair and chief executive officer of OC, Brian Chambers, stated, “Looking ahead, we will continue to focus on delivering outstanding results in the near term as we execute the strategic moves announced last week, which will further strengthen our leadership in building and construction materials and position the company for long-term success.”
Martin Marietta Materials, Inc. MLM reported mixed fourth-quarter 2023 results, with earnings surpassing the Zacks Consensus Estimate and increasing on a year-over-year basis. Revenues missed the consensus mark but rose year over year.
In the future, MLM anticipates strong demand for infrastructure, large-scale energy and domestic manufacturing projects. This will largely offset weaker residential demand and the anticipated softening in light non-residential activity. With mortgage rates stabilizing and affordability headwinds receding, MLM fully expects single-family residential construction to recover as demand still exceeds supply, particularly in its key markets.
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