NCI Building (NCS) Lags Q4 Earnings & Revenue Estimates

NCI Building Systems Inc. (NYSE:NCS) posted adjusted earnings of 28 cents per share for fourth-quarter fiscal 2016 (ended Oct 30, 2016), a 10% decline from the prior-year quarter. Moreover, earnings fell short of the Zacks Consensus Estimate of 33 cents.

Including one-time items, the company reported earnings per share of 27 cents compared to 25 cents a share in the prior-year quarter.

Operational Update

Sales rose 4% year over year to $480 million in the quarter, however, fell short of the Zacks Consensus Estimate of $486 million. The year-over-year growth was bolstered by a 3% rise in volumes.

Cost of sales increased 7% year over year to $359 million from $336 million in the year-ago quarter. Gross profit dipped 2% year over year to $121 million. Consequently, gross margin contracted 170 basis points to 25.2% in the quarter affected by rising input costs along with lower manufacturing efficiency, primarily related to the transitional impact of the ongoing manufacturing consolidation and reorganization.

Engineering, selling, general and administrative expenses increased 2% to $77.6 million, mainly owing to increased short and long-term incentive compensation costs related to the increased annual financial performance. The company reported adjusted operating income of $40.9 million, which dropped around 7% from $43.8 million in the prior-year quarter.

Segment Performance

Revenues at the Building Systems segment increased 3% to $204 million from $198 million in the year-ago quarter. The segment reported adjusted operating income of $23 million, a 13% decline from $26.4 million in the year-ago quarter.

The Coatings division reported revenues of $69.3 million, up 9% year over year. Adjusted operating profit declined 3% year over year to $7 million.

The Component segment’s revenues increased 6% year over year to $292 million. On an adjusted basis, operating profit increased 17% year over year to $31.6 million.

NCI BLDG SYSTEM Price, Consensus and EPS Surprise

Financial Update

At the end of fiscal 2016, NCI Building had cash and cash equivalents of $65.4 million compared with $99.7 million as of fiscal 2015. The company reported cash from operations of $67.5 million in fiscal 2016 compared with $105 million in the comparable year-ago period. Long-term debt was $404 million as of Oct 30, 2016 compared with $444 million as of Nov 1, 2015. NCI Building’s consolidated backlog increased 4% to $515.9 million at the end of the fiscal 2016.

Fiscal 2016 Performance

NCI Building Systems reported fiscal 2016 adjusted earnings per share of 71 cents, up 69% year over year. However, earnings missed the Zacks Consensus Estimate of 77 cents. Including one-time items, earnings came in at 70 cents, surging 192% increase from 24 cents in the prior fiscal. Revenues increased 8% year over year to $1.68 billion but fell short of the Zacks Consensus Estimate of $1.69 billion.

Outlook

Backed by expected market growth, the ongoing cost savings initiatives and opportunities to expand the IMP businesses, the company expects 2017 to be a better year than 2016 in terms of revenues and adjusted EBITDA. The company's two key cost-saving initiatives in manufacturing consolidation and ESG&A are anticipated to generate $30 to $40 million in cost savings by the end of 2018. These two initiatives are expected to drive an incremental cost savings of $10 million in fiscal 2017.

Similar to past years, NCI Building anticipates the second half performance in 2017 to be stronger than the first half. For first-quarter fiscal 2017, NCI expects revenues to be in the range of $370 to $390 million and gross margins in the range of 21.0% to 23.5%. In fiscal 2017, revenues are projected in the range of $1.75 to $1.85 billion and adjusted EBITDA to lie in the range of $175 to $205 million.

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

Zacks Rank & Key Picks

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

Some better ranked stocks in the same industry include Gibraltar Industries, Inc. (NASDAQ:ROCK) , Simpson Manufacturing Co., Inc. (NYSE:SSD) and United Rentals, Inc. (NYSE:URI) .

Gibraltar Industries has delivered an average positive earnings surprise of 67.30% in the last four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Simpson Manufacturing, which also sports a Zacks Rank #1, has an average positive earnings surprise of 18.77% in the last four quarters. United Rentals, Inc, which carries a Zacks Rank #2 (Buy) has delivered a positive average earnings surprise of 7.03% in the last four quarters.

Gibraltar Industries and Trex, each, sport a Zacks Rank #1 (Strong Buy), Caesarstone holds the same rank as NCI Building.

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>