Beacon Roofing Supply, Inc.
) reported fourth-quarter 2012 adjusted earnings per share (EPS)
of 60 cents, in line with the Zacks Consensus Estimate and 7%
higher than the year-ago quarter. Higher sales on the back of
accretive acquisitions and gross margin expansion contributed to
the growth, partially offset by higher operating expenses.
Including special items, EPS in the quarter stood at 58 cents,
down 13% year over year from 67 cents.
Total revenue increased 4% year over year to $598 million,
falling short of the Zacks Consensus Estimate of $600 million.
Organic sales declined 5.6% in the quarter. In existing markets,
complementary product sales increased 1.2% while both residential
and non-residential roofing product sales decreased 3.3% and
10.5%, respectively. The year-ago quarter included the benefit
from substantial roofing activities due to the hail storms in
Cost of goods sold increased 1.3% to $448 million in the
quarter. Gross profit rose 13% to $150 million. Gross margin
contracted 190 basis points to 25% from the year-ago quarter.
Operating income in the reported quarter inched up 1% to $48
million with operating margin dipping 20 basis points to
Fiscal 2012 Performance
Beacon Roofing's adjusted EPS in fiscal 2012 jumped 44% year
over year to $1.67, helped by increased sales and gross margins,
somewhat offset by higher operating expenses and a higher income
tax provision. EPS was in line with the Zacks Consensus Estimate.
Including special items, EPS stood at $1.58 compared with $1.27
in the prior year.
Total revenue increased 12% year over year to $2.04 million,
in line with the Zacks Consensus Estimate. Revenues benefited
from increased re-roofing and remodeling activities in the first
half, including the impact from improved weather conditions and
stronger business in several markets that experienced storms last
year and by higher average selling prices.
Cash and cash equivalents declined to $40.2 million as of
September 30, 2012 from $143 million as of September 30, 2012,
mainly due to payback of debt this year and acquisitions. Total
debt amounted to $277.8 million as of September 30, 2012,
compared with $327.1 million as of September 30, 2012.
Debt-to-capitalization ratio improved to 30% as of September 30,
2012 from 38% as of September 30, 2012.
Cash flow from operating activities improved to $85 million
during the year compared with $79 million in the prior year due
to higher net income and from higher non-cash charges this year,
partially offset by the impact from less favorable changes in
Beacon Roofing's growth strategy includes both internal growth
through opening branches, growing sales with existing customers,
adding new customers and introducing new products as well as
through acquisitions. Since 1997 through 2011, the company has
made 25 strategic and complementary acquisitions.
The company has recently acquired Structural Materials Company
in Southern California, Contractors Roofing & Supply Co. in
St. Louis and Pennsylvania-based McClure-Johnston Company. Its
main acquisition strategy is to target market leaders in
geographic areas that it does not have a presence. Beacon Roofing
also acquires companies to supplement branch openings within
Furthermore, over 70% of expenditures in the roofing market
are for re-roofing projects, with the balance being for new
construction. Re-roofing projects are generally considered
maintenance and repair expenditures and are less likely to be
postponed during periods of recession or slow economic growth. As
a result, demand for roofing products is less volatile than
overall demand for construction products. Demand for re-roofing
is also on the rise providing ample scope for Beacon to expand in
U.S. residential construction is finally stabilizing and is on
the road to a much-awaited recovery, which bodes well for the
Beacon Roofing. Furthermore, the company will stand to benefit
from the rebuilding and repair activities following the
devastating Hurricane Sandy.
Beacon is one of the three largest roofing material
distributors in the United States and Canada, with more than 90%
of sales coming from the U.S. Beacon competes with privately-held
American Builders & Contractors Supply Co Inc., Guardian
Building Products Distribution Inc. and Stock Building Supply
Inc. Beacon Roofing currently maintains a Zacks #3 Rank (Hold)
over the short term.
BEACON ROOFING (BECN): Free Stock Analysis
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