Beacon Roofing Shines in 2Q - Analyst Blog

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Beacon Roofing Supply, Inc.  ( BECN ) reported second-quarter 2012 earnings of 7 cents per share, easily beating the Zacks Consensus Estimate of a loss of 8 cents. Results improved compared to a loss of 13 cents in the year-ago quarter.

Increase in sales and gross margin contributed to the growth. However, the positives were partially offset by higher operating expenses and income tax provision as compared to 2011.

Operational Update

Total revenues increased 33.4% year over year to $395.2 million, beating the Zacks Consensus Estimate of $346 million.  Organic growth increased 28.2% in the quarter.

Residential roofing product sales improved 46.0% while non-residential roofing product sales increased 17.4% from the prior-year quarter. Sales benefited from improved re-roofing and remodeling activities including impact of weather conditions, along with stronger businesses in many markets that experienced storms during 2011 as well as average selling prices. Complimentary product sales increased 6.7% in the quarter.

Cost of goods sold increased 30.4% to $301.4 million in the quarter. Gross profit rose 43.7% to $93.7 million. Operating income in the reported quarter improved to $9.75 million from a loss of $6.83 million in the year-ago quarter.

Financial Position

Cash and cash equivalents were $171.1 million as of March 31, 2012, compared with $178.4 million as of March 31, 2011. Current portion of long-term debt amounted to $86.7 million as of March 31, 2012, compared with $9.1 million as of March 31, 2011.

Cash inflow from operating activities was $80.3 million during the second-quarter of 2012 compared with $68.8 million during the second-quarter of 2011. Cash flows in the first half of 2012 were positively impacted by higher net income, partially offset by less favorable changes in working capital.

In conclusion

The company was benefited by the ramp up in roofing and exterior remodeling activities. The price increases occurring mostly in the second half of 2011 also added to the benefits. Beacon expects a strong second half in fiscal 2012 boosted by a robust balance sheet and credit facility conditions.

Currently, we have a long-term Neutral recommendation on Beacon. The stock retains a short-term Zacks #3 Rank (Hold).

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 (BECN): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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