NCI Building Up on Earnings Beat - Analyst Blog

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Shares of NCI Building Systems Inc. ( NCS ) went up 2.25% as the company reported a 25% increase in adjusted earnings per share to 10 cents in the fourth quarter ended Nov 3, 2013, ahead of the Zacks Consensus Estimate of 7 cents a share.

Including one-time items, the company reported earnings per share of 11 cents in the reported quarter, compared with 8 cents in the year-ago quarter.

Operational Update

Sales climbed 11% year over year to $400 million in the quarter, surpassing the Zacks Consensus Estimate of $347 million. The improvement was driven by higher volumes in each of the operating segments, as well as the contribution from an extra week in the quarter.  Backlog at year-end was $322.2 million, up 6% from $303.6 million a year ago.

Cost of sales during the quarter increased 11% to $313 million. Adjusted gross profit rose 9% to $86 million. However, gross margin contracted 20 basis points to 21.6% in the quarter.

Engineering, selling, general and administrative expenses increased 12% to $71 million. The increment was mainly due to an extra week in the quarter, higher non-cash stock compensation charges, distribution channels improvement expenses, manufacturing capabilities and customer responsiveness, and variable costs from increased activity levels. Operating profit edged up 2% to $15.9 million in the quarter from $15.6 million the prior year.

Segment Performance

Revenues at Engineered Building Systems increased 6% year over year to $201 million. The segment reported an adjusted operating income of $9 million in the quarter, down from the year-ago quarter's income of $14.2 million. This was mainly due to higher manufacturing costs and shipments of lower margin projects resulting from pricing pressure earlier in the fiscal year.  

Revenues from the Metal Coil Coating segment climbed 15% year over year to $66.5 million led by HVAC, lighting fixtures, and appliance sales and strong shipments of heavy gauge packages to construction markets. Operating profit was $7.7 million in the quarter, up 10% from the prior-year quarter.

The Metal Component segment generated revenues of $201 million, up 11% year over year. Operating profit for the segment hiked 65% to $16.9 million due to higher volumes of legacy products and improving sales margins.

Fiscal 2013 Performance

NCI Building Systems reported break-even earnings in fiscal 2013 versus the year ago loss of 25 cents. Including special items, the company reported a loss per share of 29 cents narrowed from the loss of $3.81 in fiscal 2012. Revenues increased 13.4% to $1.3 billion from $1.1 billion in the prior year.

Financial Update

As of Nov 3, 2013, the company had cash and cash equivalents of $77.4 million, up from $55.1 million as of Oct 28, 2012. Long-term debt increased marginally to $235 million as of Nov 3, 2013 from $234 million as of Oct 28, 2012. Cash flow from operating activities was $64 million in fiscal 2013 compared with $47.7 million in the prior year.

Outlook

Management did not provide any specific guidance for fiscal 2014. Leading indicators for non-residential construction activity continue to trend positive. The company noted that business conditions at architectural firms have steadily improved in the past several quarters, which points toward an upper single-digit year-over-year growth in nonresidential new construction in 2014.

Furthermore, the recent booking trends seem to support this momentum. The company anticipates improved margins in fiscal 2014 driven by greater commercial discipline, manufacturing efficiencies and volume-driven operating leverage. The company also believes that the benefit of improved pricing from its August performance will be reflected in orders shipped in the first half of 2014.

The Coatings group continues to be positively impacted by higher volumes and expanding margin. Further, the Middletown, Ohio-based light gauge paint line has ramped up production and was profitable in the fourth quarter of 2013. The company also witnessed a pick-up in demand mainly from the commercial, industrial and agricultural sectors starting August.

The recent additions to the Buildings backlog in the period continue to reflect a number of larger projects and projects with higher margins. This bodes well for the company going ahead.

Headquartered in Texas, NCI Building Systems is one of the leading integrated manufacturers of metal products for the North American non-residential construction industry. Currently, the shares of NCI Building Systems carry a Zacks Rank #3 (Hold). 

Some better-ranked stocks in the same sector are CaesarStone Sdot-Yam Ltd. ( CSTE ), James Hardie Industries plc ( JHX ) and Simpson Manufacturing Co., Inc. ( SSD ). While CaesarStone and James Hardie hold a Zacks Rank #1 (Strong Buy), Simpson Manufacturing has a Zacks Rank #2 (Buy).



CAESAR STONE SD (CSTE): Free Stock Analysis Report

JAMES HARDI-ADR (JHX): Free Stock Analysis Report

NCI BLDG SYSTEM (NCS): Free Stock Analysis Report

SIMPSON MFG INC (SSD): 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.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CSTE , JHX , NCS , SSD

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