As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the home construction materials industry, including Builders FirstSource (NYSE:BLDR) and its peers.
Traditionally, home construction materials companies have built economic moats with expertise in specialized areas, brand recognition, and strong relationships with contractors. More recently, advances to address labor availability and job site productivity have spurred innovation that is driving incremental demand. However, these companies are at the whim of residential construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of home construction materials companies.
The 12 home construction materials stocks we track reported a slower Q2. As a group, revenues missed analysts’ consensus estimates by 2.4% while next quarter’s revenue guidance was 22.9% below.
Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Thankfully, home construction materials stocks have been resilient with share prices up 6.4% on average since the latest earnings results.
Builders FirstSource (NYSE:BLDR)
Headquartered in Irving, TX, Builders FirstSource (NYSE:BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.Builders FirstSource reported revenues of $4.46 billion, down 1.6% year on year. This print was in line with analysts’ expectations, but overall, it was a slower quarter for the company with full-year revenue guidance missing analysts’ expectations.
“As we continue to operate in this complex environment, I am proud of our resilient second quarter results highlighted by maintaining a mid-teens EBITDA margin, which demonstrates the strength of our differentiated business model and the hard work of our extraordinary team members,” commented Dave Rush, CEO of Builders FirstSource.
Interestingly, the stock is up 31.5% since reporting and currently trades at $196.81.
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Best Q2: JELD-WEN (NYSE:JELD)
Founded in the 1960s as a general wood-making company, JELD-WEN (NYSE:JELD) manufactures doors, windows, and other related building products.JELD-WEN reported revenues of $986 million, down 12.4% year on year, falling short of analysts’ expectations by 1.4%. However, the business still had a very strong quarter with an impressive beat of analysts’ organic revenue and earnings estimates.
The market seems happy with the results as the stock is up 9.2% since reporting. It currently trades at $16.03.
Weakest Q2: Gibraltar (NASDAQ:ROCK)
Gibraltar (NASDAQ:ROCK) makes renewable energy, agriculture technology and infrastructure products. Its mission statement is to make everyday living more sustainable.Gibraltar reported revenues of $353 million, down 3.3% year on year, falling short of analysts’ expectations by 5.5%. It was a disappointing quarter as it posted a miss of analysts’ earnings estimates and full-year revenue guidance missing analysts’ expectations.
As expected, the stock is down 12.8% since the results and currently trades at $69.99.
Fortune Brands (NYSE:FBIN)
Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE:FBIN) makes plumbing, security, and outdoor living products.Fortune Brands reported revenues of $1.24 billion, up 6.6% year on year. This number missed analysts’ expectations by 3.1%. It was a softer quarter as it also produced a miss of analysts’ earnings and organic revenue estimates.
The stock is up 21.6% since reporting and currently trades at $87.80.
Griffon (NYSE:GFF)
Initially in the defense industry, Griffon (NYSE:GFF) is a now diversified company specializing in home improvement, professional equipment, and building products.Griffon reported revenues of $647.8 million, down 5.2% year on year. This number came in 6% below analysts' expectations. Aside from that, it was a mixed quarter as it also recorded optimistic EBITDA guidance for the full year but full-year revenue guidance missing analysts’ expectations.
Griffon had the weakest performance against analyst estimates among its peers. The stock is down 1.7% since reporting and currently trades at $68.33.
This content was originally published on Stock Story
