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NCI Building (NCS) Beats on Q1 Earnings, Revenues Miss - Analyst Blog

NCI Building Systems Inc.NCS , posted adjusted earnings of 3 cents per share in the first quarter of fiscal 2015 (ended Feb 1, 2015), reversing a loss of 5 cents per share reported in the year-ago quarter. Realignment of manufacturing operations, commercial discipline and supply chain management benefitted results. The analysts polled by Zacks were expecting break even results on a per share basis.

Including one-time items, the company reported a breakeven result in the quarter unlike a loss of 6 cents in the prior-year quarter.

Operational Update

Sales rose 4% year over year to $323 million in the first quarter, primarily driven by higher volumes in legacy single skin business and the partial contribution from the CENTRIA acquisition. Revenues, however, fell short of the Zacks Consensus Estimate of $337 million.

Cost of sales decreased to $250.8 million from $252 million in the year-ago quarter. Adjusted gross profit grew 23.9% year over year to $72 million. Consequently, gross margin expanded 350 basis points to 22.3% in the quarter, primarily driven by improved manufacturing efficiencies, supply chain management, impact of commercial discipline and improved product mix.

Engineering, selling, general and administrative expenses were $62.9 million compared with $61.4 million in the prior-year quarter. The company reported an adjusted operating income of $8.7 million, as against a loss of $3.5 million the prior-year quarter.

Segment Performance

Revenues at the Engineered Building Systems segment decreased 1.6% year over year to $149.8 million. The segment reported an adjusted operating income of $9.6 million, up significantly from $1.6 million in the year-ago quarter, aided by benefit from strong margins and backlog growth.

Metal Coil Coating segment's revenues rose 2.5% year over year to $55.6 million. On an adjusted basis, operating profit declined 27.8% year over year to $4 million as compared with the prior-year quarter.

The Metal Component segment generated revenues of $172.8 million, up 9.2% year over year. Adjusted operating profit for the segment increased 141% to $9.9 million.

Financial Update

At the end of first-quarter fiscal 2015, NCI Building had cash and cash equivalents of $50.7 million versus $66.6 million as of Nov 2, 2014. The company generated $2.2 million in cash from operating activities during the quarter compared with $34 million in the prior-year quarter. Long-term debt was $482 million as of Feb 1, 2015, compared with $233 million as of Nov 2, 2014.

NCI Building's Engineered Building Systems backlog grew 10% year over year and consolidated backlog increased 7% to $333 million.

NCI Building acquired CENTRIA on Jan 16, 2015, which was funded by $250 million Senior Notes. The acquisition will augment its leadership position while expanding the range of its cutting edge proprietary product offerings in the architectural metal panel market.

Outlook

Although management did not provide any specific guidance for fiscal 2015, NCI Building is expected to benefit from simplified organizational structure which will support greater efficiency and improved execution.

The company expects the Coatings segment to follow product and end- market diversification as well as operational efficiencies to drive profitable growth. The Components group will benefit from the CENTRIA acquisition. While strong margins, backlog growth, commercial discipline and manufacturing efficiencies will drive growth for the Buildings group.

Notably, the main indicators for non-residential construction activity continue to trend positive. The most recently available CBRE Econometric Advisors data reflects a continuation of increasing demand for the industrial property sector. Further, declining vacancy rates will maintain new construction starts, especially in the higher volume sectors of warehousing through the current calendar year.

Additionally, NCI Building's strategic investments including development of quality process, simplification of organizational structure and expansion of product offerings bode well for the company. Improvement in bookings and backlog will also aid growth.

Headquartered in Texas, NCI Building Systems is a leading integrated manufacturer of metal products in the North American non-residential construction industry.

Currently, NCI Building Systems carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Graña y Montero SAA GRAM , Quanex Building Products Corporation NX and Trex Co. Inc. TREX . All these stocks carry a Zacks Rank #1 (Strong Buy).

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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