Beacon Roofing Supply, Inc.
) reported third-quarter fiscal 2013 (ended Jun 30, 2013)
adjusted earnings per share of 55 cents compared with 62 cents
earned in the year-ago quarter. The results fell short of the
Zacks Consensus Estimate of 71 cents. Tough weather conditions
and increase in product cost led to the decline.
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Reported profit for the quarter was $27.2 million (or 55 cents a
share), up 8% from $25.4 million (or 53 cents per share) recorded
a year ago. The year-ago quarter's results included refinancing
cost of 6 cents per share and increase in liability of 3 cents
per share. No such item was recorded in the reported quarter.
Total revenues increased 12% year over year to $627.2 million,
but missed the Zacks Consensus Estimate of $663 million. Organic
sales improved 1.2% in the quarter. In existing markets,
non-residential roofing product sales edged up 1.1%.
Complementary product and residential roofing products sales
increased 5.2% and 0.2% year over year, respectively. The
reported quarter benefited from the positive impact of several
acquisitions and organic sales gain, partly offset by unusually
heavy rains, harsh weather as well as negative impact from hail
Cost of goods sold increased 14% year over year to $479.8
million. Gross profit rose 4.6% to $147 million from $140.7
million in the year-ago quarter. Gross margin contracted 150
basis points year over year to 23.5%. Pricing pressure due to
weaker demand hurt gross margin.
Operating expenses for the quarter crept up 11% to $99 million,
due to increased expenses from the acquisitions. Operating income
decreased 6% year over year to $47.9 million. Consequently,
operating margin slid 150 basis points year over year to 7.6%.
Cash and cash equivalents declined to $26 million as of Jun 30,
2013, from $31 million as of Jun 30, 2012. Total debt amounted to
$229 million as of Jun 30, 2013, compared with $234 million as of
Jun 30, 2012. Debt-to-capitalization ratio declined to 24% as of
Jun 30, 2013, from 27.8% as of Jun 30, 2012.
Cash flow from operating activities improved to $49 million in
the quarter from $35 million in the prior-year quarter owing to
favorable changes in working capital.
For 2013, Beacon Roofing lowered its earnings per share
forecast to $1.50-$1.60 from its previous view of $1.75-$1.85.
Capital expenditure is expected to be around 1% to 1.2% of sales
for the full year, as a result of continued fleet upgrades. The
company expects gross margin for the fourth quarter in the band
Beacon Roofing will be benefited by continued focus on cost
control and gross margin improvement. The company also expects
new construction market improvement to drive growth.
Beacon Roofing's acquisition pipeline remains active and we
expect the acquisitions to continue at an accelerated pace in the
near term. In addition to 19 branches acquired so far in 2013,
the company opened 2 new branches in the quarter. Beacon Roofing
is also on track to open 20 branches in 2014.
Moreover, both residential and non-residential construction
sectors are showing signs of improvement, which bodes well for
the company. Demand for re-roofing is also on the rise providing
ample scope for Beacon to expand in this market. However, harsh
weather, lower storm demand and intensified competition will
remain headwinds in the upcoming quarters.
Peabody, Mass.-based, Beacon Roofing is one of the largest
distributors of residential and non-residential roofing materials
and complementary building products in the U.S. and Canada, with
more than 90% of sales coming from the U.S.
Beacon Roofing currently maintains a Zacks Rank #5 (Strong Sell).
Oher stocks in the same industry with favorable Zacks rank are
Lumber Liquidators Holdings, Inc.
) with a Zacks Rank #1 (Strong Buy) as well as
Builders FirstSource, Inc
The Home Depot, Inc.
) with a Zacks Rank #2 (Buy).