Beacon Roofing Tops Q1 Earnings, Completes Acquisitions

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Beacon Roofing Supply, Inc. BECN reported adjusted earnings (excluding the impact of non-recurring RSG acquisition-related cost) of 41 cents per share, ahead of the Zacks Consensus Estimate of 36 cents. Higher volume as well as gross margins, partially offset by increased operating expenses owing to the incremental costs associated with the RSG acquisition, led to the 58% year over year improvement in adjusted earnings.

However, excluding the acquisition related cost, first-quarter earnings plunged to 12 cents in the quarter from 26 cents in the year ago quarter. This led to a 12% drop in Beacon Roofing's share price since it reported its first-quarter fiscal 2016 results on Feb 5.

Beacon Roofing Supply Inc. (BECN) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Operational Update

This distributor of residential and non-residential roofing materials posted record sales in the first fiscal quarter, which totaled $976.5 million, up 63.8% year over year.

The year-over-year sales increase was led by growth across all product lines of the company. Residential roofing product sales increased 76.6% while non-residential roofing product sales rose 59.4%. Complementary product sales rose 37.3%. Existing market sales (excluding acquisitions) were up 11.8%.

Cost of goods sold increased 38.3% year over year to $743.3 million. Gross profit was $233.2 million, up from $137.6 million in the year-ago quarter. Gross margin expanded 80 basis points (bps) year over year to 23.9%.

Operating expenses for the quarter jumped 10% year over year to $206.3 million. The company continues to look for ways to leverage its cost structure and cost controls. With the acquisition of RSG, it is already seeing a significant improvement in its operating cost leverage.


Beacon Roofing reported cash and cash equivalents of $32.2 million as of Dec 31, 2015, compared with $23.3 million as of Dec 31, 2014.

During the reported quarter, Beacon Roofing paid down over $100 million of its debt. The company also made three acquisitions in December, but still end the quarter with the same debt balance. The company intends to meet its commitment of reducing its leverage to under 2, in three years.
The company generated $44.7 million in cash from operating activities in the quarter compared with cash usage of $40.2 million in the year-ago quarter.


For the remainder of fiscal 2016, Beacon Roofing plans to retain its focus on sales growth, gross margin stability and improved operating leverage. This should enable it to deliver a strong full-year performance, including impressive earnings for its investors.

Looking at the combined company, Beacon Roofing expects revenues in the range of $3.8 billion to $4 billion for fiscal 2016. Gross margin for the fiscal is projected in the band of 23% to 24%. This estimate does not take into consideration any pricing impact.

The company currently seeks to ensure that RSG and the three acquisitions made in December are integrated properly. Alongside, emphasis will remain on driving profitable growth from the existing Beacon and RSG Greenfield's.

Zacks Rank

Beacon Roofing currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the sector are BMC Stock Holdings, Inc. STCK , Builders FirstSource, Inc. BLDR and Lowe's Companies, Inc. LOW . All the three stocks hold the same Zacks Rank as Beacon Roofing.

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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 Nasdaq, Inc.

This article appears in: Business , Investing , Earnings , Stocks
Referenced Symbols: LOW , BECN , BLDR ,

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