Simpson Manufacturing Co., Inc. SSD reported dismal third-quarter 2024 results, with earnings missing the Zacks Consensus Estimate and declining on a year-over-year basis.

Following the announcement, the company’s shares lost 4.5% in the after-hours trading session yesterday. Investor sentiment was negatively impacted by SSD’s decision to lower its 2024 guidance, which reflects current expectations that U.S. housing starts will be down from the prior year.

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Despite pressure in the housing markets in the United States and Europe, the company's quarterly net sales increased modestly year over year. The company grew its North America’s volume by 500 basis points (bps) ahead of U.S. housing starts in the trailing 12 months. Although overall profitability is good, it is below expectations. The company is focusing on aligning costs with market conditions to improve profitability.

Inside the Headlines of SSD’s Q3 Results

In third-quarter 2024, the company reported earnings of $2.21 per share, which missed the Zacks Consensus Estimate of $2.40 by 7.9%. The metric also declined 9.1% year over year.

Net sales of $578.2 million increased 1.2% year over year, on the back of stable volumes in North America and modest growth in Europe. Strength in national retail, component manufacturing and OEM markets supported the overall performance, despite weaker residential and commercial sectors. In Europe, the company outperformed the market, benefiting from new customer acquisitions and product applications.

Adjusted EBITDA decreased 6.6% from the year-ago quarter’s figure to $148.3 million.

SSD’s Segmental Performance

North America (accounted for approximately 78.6% of net sales): The segment’s net sales grew 1% on a year-over-year basis to $461.4 million, driven by slightly higher average sales prices resulting from a favorable sales mix on relatively flat sales volumes, along with incremental sales from the company's 2024 acquisitions.

Gross profit decreased 3.5% from the year-ago quarter’s figure to $228.2 million. Gross margin also decreased 230 bps year over year to 49.5%. The downside was caused by higher factory, overhead and warehouse costs, as a percentage of net sales, partly offset by efficiency gains.

Europe (20.6%): Net sales in the segment increased 1.8% year over year to $121.2 million on the back of increased sales volumes, partly offset by price decreases in some regions. Net sales also benefited from the positive effect of foreign currency translation of approximately $1.5 million.

Gross profit for the quarter was $44.3 million, indicating a 1.7% decline year over year. On a year-over-year basis, the gross margin contracted 130 bps to 36.6%.

Asia/Pacific (0.8%): Net sales in the segment increased 9.6% year over year to $4.6 million.

Operating Highlights of SSD

In the third quarter, the company reported a gross profit of $275.1 million, down 2.8% from $282.9 million reported in the year-ago period. The gross margin contracted 200 bps year over year to 46.8%.

The quarter’s operating income of $124.9 million was down from the year-ago quarter’s level of $140.2 million. Operating margin decreased 290 bps to 21.3% from the year-ago quarter’s reported value of 24.2%.

General and administrative expenses were $70.6 million in the third quarter, up from $64.8 million reported in the year-ago quarter.

SSD’s Financials

As of Sept. 30, 2024, SSD had cash and cash equivalents of $339.4 million, down from $429.8 million reported at the end of 2023. As of third-quarter 2024 end, long-term debt (net of current portion and issuance costs) was $442.9 million, down from $458.8 million at the end of 2023.
 
In the quarter, net cash provided by operating activities was $102.5 million, down from $200.9 million reported in the year-ago quarter.

2024 Guidance Lowered

For 2024, Simpson Manufacturing now expects the operating margin to be in the range of 19-19.5% (down from the prior projection of 20-21%), versus 21.5% in 2023.

For the year, the company now anticipates capital expenditures to be in the range of $175-$185 million compared with the prior projection of $180-$190 million.

Zacks Rank & Recent Construction Releases

Simpson Manufacturing currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lennar Corporation LEN reported third-quarter fiscal 2024 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate.

On a year-over-year basis, revenues increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum. Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.

KB Home KBH reported mixed results for third-quarter fiscal 2024 (ended Aug. 31, 2024). Its earnings met the Zacks Consensus Estimate, while revenues beat the same. On a year-over-year basis, both metrics increased.

KBH remains encouraged for the fiscal fourth quarter, thanks to the recent strength in demand for its affordably priced personalized homes.

Acuity Brands, Inc. AYI reported solid results in fourth-quarter fiscal 2024 (ended Aug. 31, 2024), with earnings and net sales surpassing the Zacks Consensus Estimate. Earnings beat the consensus mark for the 18th consecutive quarter.

While the Intelligent Spaces Group or ISG segment saw robust sales growth, the ABL segment showed tepid growth in the quarter. This mixed performance reflects the broader market dynamics, where traditional lighting may face headwinds, while intelligent spaces and connected solutions continue to gain traction.

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