Beacon Roofing (BECN) Beats Q1 Earnings & Revenue Estimates

Beacon Roofing Supply, Inc. (NASDAQ:BECN) 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.

Beacon Roofing Supply, Inc. Price, Consensus and EPS Surprise

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

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 U.S. 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. Further, the company remains committed to deliver strong growth and operating performance to shareholders.

Share Price Performance

Beacon Roofing has underperformed the industry in a year’s time. The stock has gained 21.6% compared with 32.5% growth recorded by the industry.

Zacks Rank & Other Stocks to Consider

Beacon Roofing currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same industry are Fastenal Company (NASDAQ:FAST) , The Home Depot, Inc. (NYSE:HD) and Lowe's Companies, Inc. (NYSE:LOW) . All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Fastenal Company has a long-term earnings growth rate of 14%. Its shares have rallied 23.2%, over the past six months.

Home Depot has a long-term earnings growth rate of 14.6%. The company’s shares have been up 17.7% during the same time frame.

Lowe's Companies has a long-term earnings growth rate of 18.4%. The stock has gained 23.4% in six months’ time.

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