Building materials supplier Builders FirstSource (NYSE:BLDR) stock has been basing for the last month in the bear market as shares are down (-20%) year-to-date.
Rising interest rate headwinds are cooling consumer mortgage applications, but there’s still a supply shortage that will fuel further demand for homes.
Economic uncertainty from inflationary pressures, supply constraints, logistics disruptions, and the Russian Ukraine conflict are still not impacting homebuilding as secular tailwinds continue to persist.
Commodity inflation and pricing discipline combined with a robust residential housing demand drove the Company to a record $1 billion adjusted EBITDA on a record $6 billion in sales in Q1 2022.
The Company blew away its fiscal Q1 2022 top and bottom-line earnings and raised forward guidance in addition to authorizing a $2 billion share buyback.
Shares are trading at 5.42X forward earnings. Prudent investors looking for indirect exposure to the housing market can watch for opportunistic pullbacks in shares of Builders FirstSource.
Q1 Fiscal 2022 Earnings Release
On May 10, 2022, Builders released its fiscal first-quarter 2022 results for the quarter ending March 2022. The Company reported earnings-per-share (EPS) profits of $3.90 beating consensus analysts estimates for a profit of $2.02, a $1.88 beat.
Revenues grew 36.1% year-over-year (YoY) to $5.68 billion, beating consensus analyst estimates for $4.69 billion. Adjusted EBITA rose 119.8% for a Q1 record of $1 billion driven by commodity inflation, double-digit core organic growth, and robust residential housing market.
The Company had a net debt to LTM adjusted EBITDA ratio of 0.9X and liquidity of $1.2 billion. The Company repurchased 3.6 million shares for $286 million. The Board authorized a new $2 billion share buyback program.
The Company sees growth across all geographics in fiscal full-year 2022 with single-family starts in the mid-single digits, multi-family starts in the low to mid-single digits, and R&R in the low to mid-single digits. Free cash flow is expected in the range of $2 billion to $2.4 billion assuming average commodity prices in the range of $700 to $1,000.
Conference Call Takeaways
Builders CEO David Flitman noted that Company entered 2022 with record net sales, gross margin, and adjusted EBITA with strong organic sales growth of 15%. The Company continues to invest in operations despite significant supply chain constraints.
The blowout Q1 2022 had adjusted EBITDA margin of 17.6%. The Company is focused on tuck-in M&A opportunities of which there are over 1,000 candidates with sub $100 million revenue levels.
So far, the Company has completed seven acquisitions for $1.2 billion in the last year. Builders expects to spend around $500 million in accretive M&A this year. On Apr. 1, 2022, the Company acquired Paul Truss, a building components supplier to single and multi-family homes with seven locations throughout South Carolina, Georgia, and Texas with $138 million in sales last year.
It also acquired Valley Truss out of Boise, Idaho, which also provides building components to single and multi-family homes with nearly $26 million in 2021 sales.
The Company continues its digital transformation with the continued successful deployment of Paradigm Estimate to provide quicker and more accurate customer quotes.
The Company has completed over 2,000 estimates for customers across nine states as the momentum continues to accelerate. He added,
"In addition, this process provides a foundation for our configurable visualization technology and improved design and construction efficiency for homebuilders. Regarding our visualization technology, I'm pleased to announce that we have signed an agreement with Hayden Homes, a builder in the Pacific Northwest for the use of our Homebuilder Omni platform.
"With their plans of approximately 2,000 starts, Hayden Homes will become the largest builder currently using our digital solutions. We believe we are making the necessary investments to revolutionize our industry and that our digital strategy is on track to capture an incremental $1 billion growth opportunity by 2026."
BLDR Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a near-term precision view of the price action playing field for BLDR shares. The weekly rifle chart peaked near the $71.41 Fibonacci (fib) level before falling towards the $57.52 fib before staging a rally.
The weekly rifle chart has a make or break with a rising 5-period moving average (MA) at $64.23 and 15-period MA at $67.13 with a rising 50-period MA at $62.16. The weekly lower Bollinger® Bands (BBs) are starting to compress at $53.22 as upper BBs fall at $82.19.
The weekly stochastic has a mini pup through the 30-band setting up a make or break with the potential bearish inverse pup breakdown if the weekly 5-period MA support breaks.
The weekly market structure low (MSL) buy triggers on a breakout through $66.83. The daily rifle chart has been consolidating in a tightening range as the daily 5-period rises at $63.36 to attempt a crossover breakout through the 15-period MA at $64.14 and the 200-period MA at $65.79 powered by the rising stochastic through 40-band. The daily upper BBs sit at $70.79 and lower BBs at $58.20.
Prudent investors can watch for opportunistic pullback levels at the $63.56 fib, $61.91 fib, $60.25 fib, $58.96 fib, $57.59 fib, $54.51 fib, $50.59 fib, and the $45.54 fib level. Upside trajectories range from the $75.59 fib level up towards the $84.14 fib level.