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TopBuild (BLD) Revokes 2020 Guidance on Coronavirus Concerns

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In view of significant uncertainty arising from the novel coronavirus outbreak, TopBuild Corp. BLD announced the withdrawal of its full-year 2020 revenue and adjusted EBITDA guidance.

The company — which is slated to release first-quarter results on May 5 — had expected revenues within $2,765-$2,835 million for 2020. Adjusted EBITDA was projected between $387 million and $412 million, indicating a significant increase from $359.1 million registered in 2019.

Meanwhile, with the exception of a few states, it has been operating and installing, and distributing materials wherein residential and commercial construction is considered an essential service.

From liquidity perspective, TopBuild had $187 million cash on hand at the end of first-quarter 2020. It has $389 million available under the $450-million revolving credit facility, which excludes $61 million of letters of credit.

Jerry Volas, the company’s Chief Executive Officer, stated, “These are unprecedented times and our leadership team is responding proactively to minimize the impact on the Company’s operations. Looking ahead, we firmly believe our uniquely diversified operating model and cycle-tested management team will enable the Company to successfully weather this storm.”

Building Product Suppliers Continue to Revoke Guidance

Masco Corporation MAS revoked its previously announced 2020 and 2021 guidance. Nonetheless, the company believes that it remains well positioned to combat the current pandemic situation with its repositioned portfolio of lower ticket, more resilient products, along with a strong balance sheet and liquidity. Notably, the company has $1 billion under the revolving credit facility (read more: Masco Revokes 2020 Guidance Amid Coronavirus Pandemic).

Aegion Corporation AEGN withdrew its 2020 financial guidance issued on Feb 28, 2020, given difficulties in estimating the financial impact of the coronavirus outbreak (read more: Aegion Withdraws 2020 Guidance Amid Coronavirus Fears).

Another building product manufacturer, Foundation Building Materials FBM revoked its 2020 financial guidance in response to the COVID-19 disruption. Additionally, it expects first-quarter revenues in the range of $520-$525 million.

Building product manufacturers/suppliers have been withdrawing guidance for 2020 as the companies are unable to fully assess the economic impact of this crisis on their operations as of now. Moreover, to mitigate the financial impact of the ongoing COVID-19 pandemic, the companies have been initiating actions to reduce operating expenses.

The industry’s prospects are highly correlated to U.S. housing market conditions, and repair and remodeling activity. The U.S. housing market — which was on a strong foothold before the crisis began — is likely to slow down a bit in the near term. The latest housing starts & permit data, and monthly homebuilder confidence index also points to the same.

The most recent data from the U.S. Commerce Department revealed that housing starts dropped 1.5% to a seasonally adjusted annual rate of 1.599 million units in February from 1.62 million in January. Notably, the February data does not conclusively reflect the mounting economic effects of the pandemic. Building permits also tumbled in February, reflecting builders’ inability to ramp up construction despite a steep decline in borrowing costs. March data for housing starts/permits will be released on Apr 16.

Share Price Performance

Shares of TopBuild, which currently carries a Zacks Rank #3 (Hold), have outperformed the Zacks Building Products - Miscellaneous industry in a year’s time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company has been recording solid earnings and revenue growth over the last few quarters. During 2019, its sales increased 10.1%, adjusted earnings per share grew 31%, adjusted EBITDA was up 26.7% and adjusted EBITDA margin expanded 180 basis points from 2018. The strong performance was mainly driven by the USI acquisition and increased selling prices. Also, higher sales growth in the Installation segment and operational efficiencies added to the bliss.

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