NCI (NCS) Incurs Q1 Loss, Forms Cornerstone Building Brands

NCI Building Systems, Inc. NCS incurred a loss of 28 cents (on an adjusted basis) in first-quarter 2019 (ended Mar 30). This compares unfavorably with earnings of 14 cents in the three months ended Jan 28, 2018.

Notably, post the competition of the Ply Gem merger, the combined company moved to a calendar year-end reporting schedule. As a result, the financial results for first-quarter 2019 are not comparable with first-quarter fiscal 2018.

On Apr 11, 2019, NCI announced that it will operate as “Cornerstone Building Brands” and trade under the ticker symbol "CNR" on the New York Stock Exchange beginning May 24, 2019.

First-Quarter Highlights

The company generated $1,064.8 million of total revenues in the quarter under review. Although January and February sales volumes were negatively impacted by poor weather conditions across many of the key markets served by the company, demand improved as it moved through March. Sales rose 152.7% from $421.3 million recorded in the three months ended Jan 28, 2018. This improvement was driven by the addition of Ply Gem's sales.

Gross margin was 17.5% in the quarter versus 21.8% in the three months ended Jan 28, 2018, owing to $16.2 million of non-cash charges associated with purchase accounting for inventory related to the November 2018 merger of Ply Gem and the February 2019 acquisition of Environmental Materials, LLC.

Adjusted operating income was $7.4 million in first-quarter 2019 compared with $19.3 million in first-quarter fiscal 2018.

Adjusted EBITDA came in at $71.7 million compared with $32.4 million in the first quarter of fiscal 2018.

NCI Building Systems, Inc. Price, Consensus and EPS Surprise

NCI Building Systems, Inc. Price, Consensus and EPS Surprise | NCI Building Systems, Inc. Quote

Recent Acquisition

On Feb 20, 2019, NCI's wholly-owned subsidiary, Ply Gem Industries, Inc., acquired 100% of the outstanding limited liability company interests of Environmental Materials, LLC ("Environmental Stoneworks") and its affiliates. The acquisition will boost the company’s geographical footprint in manufactured stone products.

Manufactured stone products are now one of the fastest growing categories of exterior cladding materials.

Environmental Stoneworks, being the only manufacturer and installer of stone veneer for residential and commercial markets, offers a broad range of products. It has five manufacturing facilities, 21 installation centers and nearly 660 employees in the United States. Environmental Stoneworks generated revenues of $160 million in fiscal 2017.

The transaction will likely support NCI's strong residential, repair & remodel, and commercial platform. Also, it will allow NCI to better serve residential customers and create substantial cross-selling opportunities with commercial customers.

Zacks Rank & Key Picks

NCI Building currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Construction sector include EMCOR Group, Inc. EME, MasTec, Inc. MTZ and Quanta Services, Inc. PWR. While EMCOR sports a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy). You can the complete list of today’s Zacks #1 Rank stocks here.

EMCOR’s earnings per share are expected to increase 11% in 2019.

MasTec’s 2019 earnings per share are expected to increase 15.7%.

Quanta Services has an expected earnings growth rate of 25.3% for 2019.

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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.

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