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Building products company Boise Cascade Company (NYSE:BCC) beat analysts' expectations in Q2 CY2024, with revenue flat year on year at $1.80 billion. It made a GAAP profit of $2.84 per share, down from its profit of $3.67 per share in the same quarter last year.
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Boise Cascade (BCC) Q2 CY2024 Highlights:
- Revenue: $1.80 billion vs analyst estimates of $1.77 billion (1.5% beat)
- Adjusted EBITDA: $181.2 million vs analyst estimates of $174.0 million (4.1% beat)
- EPS: $2.84 vs analyst estimates of $2.72 (4.6% beat)
- Gross Margin (GAAP): 19.9%, down from 21.4% in the same quarter last year
- Adjusted EBITDA Margin: 10.1%, down from 12.2% in the same quarter last year
- Free Cash Flow of $101.9 million is up from -$6.87 million in the previous quarter
- Market Capitalization: $5.09 billion
Building Material DistributorsSupply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Building materials distributors that boast reliable selection and quickly deliver products to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is forcing investment in digital capabilities to communicate with and serve customers everywhere. Additionally, building materials distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Boise Cascade grew its sales at a decent 8.2% compounded annual growth rate. This shows it was successful in expanding, a useful starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Boise Cascade's recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 8.5% over the last two years.
We can dig further into the company's revenue dynamics by analyzing its most important segments, Building Material Distribution and Wood products, which are 92.1% and 27.2% of revenue. Over the last two years, Boise Cascade's Building Material Distribution revenue (plywood, siding, insulation) averaged 7.2% year-on-year declines while its Wood products revenue (lumber and beams) averaged 2% declines.
This quarter, Boise Cascade's $1.80 billion of revenue was flat year on year but beat Wall Street's estimates by 1.5%. Looking ahead, Wall Street expects sales to grow 3.7% over the next 12 months, an acceleration from this quarter.
Operating MarginBoise Cascade has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it's a show of well-managed operations if they're high when gross margins are low.
Looking at the trend in its profitability, Boise Cascade's annual operating margin rose by 5.4 percentage points over the last five years, showing its efficiency has meaningfully improved.
This quarter, Boise Cascade generated an operating profit margin of 8.2%, down 2.3 percentage points year on year. Since Boise Cascade's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Boise Cascade's full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it's at a critical moment in its life.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. Sadly for Boise Cascade, its EPS declined more than its revenue over the last two years, dropping by 23.7%. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Diving into the nuances of Boise Cascade's earnings can give us a better understanding of its performance. Boise Cascade's operating margin has declined 4.9 percentage points over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
In Q2, Boise Cascade reported EPS at $2.84, down from $3.67 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 4.6%. Over the next 12 months, Wall Street expects Boise Cascade to perform poorly. Analysts are projecting its EPS of $11.46 in the last year to shrink by 6.5% to $10.72.
Key Takeaways from Boise Cascade's Q2 Results It was good to see Boise Cascade beat analysts' revenue, adjusted EBITDA, and EPS expectations this quarter. Overall, we think this was a good quarter. The stock remained flat at $124.22 immediately following the results.
