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Agriculture products company SiteOne Landscape Supply (NYSE:SITE) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 4.4% year on year to $1.41 billion. It made a GAAP profit of $2.63 per share, down from its profit of $2.71 per share in the same quarter last year.
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SiteOne (SITE) Q2 CY2024 Highlights:
- Revenue: $1.41 billion vs analyst estimates of $1.39 billion (1.8% beat)
- EPS: $2.63 vs analyst estimates of $2.48 (6% beat)
- EBITDA Guidance for the full year is $390 million at the midpoint, below analyst estimates of $413.2 million
- Gross Margin (GAAP): 36.1%, in line with the same quarter last year
- Free Cash Flow of $135.3 million is up from -$108.2 million in the previous quarter
- Organic Revenue fell 3% year on year (4.1% in the same quarter last year)
- Market Capitalization: $6.49 billion
Known for distributing John Deere tractors and LESCO turf care products, SiteOne Landscape Supply (NYSE:SITE) provides landscaping products and services to professionals, including irrigation, lighting, and nursery supplies.
Specialty Equipment DistributorsHistorically, specialty equipment distributors have boasted deep selection and expertise in sometimes narrow areas like single-use packaging or unique lighting equipment. Additionally, the industry has evolved to include more automated industrial equipment and machinery over the last decade, driving efficiencies and enabling valuable data collection. Specialty equipment distributors whose offerings keep up with these trends can take share in a still-fragmented market, but like the broader industrials sector, this space is at the whim of economic cycles that impact the capital spending and manufacturing propelling industry volumes.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Luckily, SiteOne's sales grew at an exceptional 14.8% compounded annual growth rate over the last five years. This shows it expanded quickly, 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. SiteOne's annualized revenue growth of 8.5% over the last two years is below its five-year trend, but we still think the results were respectable.
We can dig further into the company's sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don't accurately reflect its fundamentals. Over the last two years, SiteOne's organic revenue averaged 1.9% year-on-year growth. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline performance.
This quarter, SiteOne reported reasonable year-on-year revenue growth of 4.4%, and its $1.41 billion of revenue topped Wall Street's estimates by 1.8%. Looking ahead, Wall Street expects sales to grow 5.7% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
SiteOne was profitable over the last five years but held back by its large expense base. It demonstrated mediocre profitability for an industrials business, producing an average operating margin of 7.2%. This result is surprising given its high gross margin as a starting point.
Analyzing the trend in its profitability, SiteOne's annual operating margin might have seen some fluctuations but has generally stayed the same over the last five years, which doesn't help its cause.
In Q2, SiteOne generated an operating profit margin of 12%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
SiteOne's EPS grew at a spectacular 16.5% compounded annual growth rate over the last five years, higher than its 14.8% annualized revenue growth. However, this alone doesn't tell us much about its day-to-day operations because its operating margin didn't expand.
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. SiteOne's two-year annual EPS declines of 25.7% were bad and lower than its 8.5% two-year revenue growth.
In Q2, SiteOne reported EPS at $2.63, down from $2.71 in the same quarter last year. Despite falling year on year, this print beat analysts' estimates by 6%. Over the next 12 months, Wall Street expects SiteOne to grow its earnings. Analysts are projecting its EPS of $3.38 in the last year to climb by 23.5% to $4.17.
Key Takeaways from SiteOne's Q2 ResultsWe enjoyed seeing SiteOne exceed analysts' revenue expectations this quarter. We were also glad its EPS outperformed Wall Street's estimates. On the other hand, its EBITDA forecast for the full year missed. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock remained flat at $143.58 immediately after reporting.
