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Why Is Beacon Roofing (BECN) Down 6.2% Since its Last Earnings Report?

A month has gone by since the last earnings report for Beacon Roofing Supply, Inc.BECN . Shares have lost about 6.2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is BECN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Beacon Roofing Beats Q1 Earnings & Revenue Estimates

Beacon Roofing reported adjusted earnings of 68 cents per share in the first-quarter fiscal 2018. Earnings improved 21% year over year driven by strong net sales growth, attractive operating expense leverage and beneficial tax adjustments. Earnings also beat the Zacks Consensus Estimate of 55 cents.

On a reported basis, the company recorded earnings of 98 cents per share compared to 33 cents reported in the prior-year quarter.

Operational Update

This distributor of residential and non-residential roofing materials posted record sales of $1.12 billion, indicating a 12% year-over-year rise. Also, revenues beat the Zacks Consensus Estimate of $1.10 billion.

Residential roofing product sales increased 11.1%, delivering the 15th consecutive quarter of sales growth. Non-residential roofing product sales registered growth of 5.4% and complementary product sales were up 27.5%. Existing markets same day sales, excluding acquisitions, increased 8.3% for the fiscal first quarter.

Cost of goods sold climbed 13.5% to $852 million. Gross profit came in at $269.8 million, up 7.4% from $251 million reported in the year-ago quarter. Gross margin contracted 110 basis points (bps) to 25%.

Operating expenses for the quarter were up 8% year over year to $220.7 million. Operating income in the quarter came in at $49.1 million, up 4.6% from $47 million in the prior-year quarter. Operating margin contracted 40 bps to 4.3% in the reported quarter.

Cash Position

Beacon Roofing reported cash and cash equivalents of $63.8 million as of Dec 31, 2017, compared with $73.3 million as of Dec 31, 2016. The company reported cash used in operating activities of $40.5 million during the fiscal first quarter compared to cash inflow of $78 million in the comparable quarter of the previous fiscal.

On Jan 2, 2018, Beacon Roofing acquired Allied Building Products. The acquisition added approximately $2.6 billion in pro forma revenues, a network of more than 200 branches and an outstanding workforce. The Allied integration process is proceeding well. Through this acquisition, Beacon Roofing will gain foothold in the robust, growing and still-consolidating interior products market.

Beacon Roofing is poised to gain from the December 2017 tax reform. The tax savings will be utilized to further improve the company's balance sheet, pursue additional growth avenues and invest in core business. Furthermore, the company remains committed to deliver strong growth and operating performance to shareholders.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been six revisions higher for the current quarter compared to four lower. In the past month, the consensus estimate has shifted downward by 128% due to these changes.

Beacon Roofing Supply, Inc. Price and Consensus

Beacon Roofing Supply, Inc. Price and Consensus | Beacon Roofing Supply, Inc. Quote

VGM Scores

At this time, BECN has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions indicates a downward shift. It comes with little surprise BECN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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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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