TopBuild Corp. BLD reported mixed results for the third-quarter 2024, wherein its earnings topped the Zacks Consensus Estimate and sales missed the same.

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Nonetheless, both earnings and sales increased year over year on the back of pricing and increased volumes. TopBuild also benefited from acquisitions despite the challenges.

Shares of this installer and distributor of insulation and other building products climbed 4.3% during the trading session on Sept. 5. Positive investor sentiment was witnessed as the company achieved record quarterly sales and profit. The company’s focus on growth and profitability drove strong performance in both its installation and specialty distribution segments.

However, the company has trimmed its sales and adjusted EBITDA views for 2024 due to the ongoing challenges in the housing market and delays in commercial and industrial projects. Despite this, the company remains optimistic, supported by growing demand for energy efficiency, the U.S. housing supply shortage, increasing household formations and the potential for lower interest rates to drive growth.

Inside BLD’s Q3 Results

TopBuild reported adjusted earnings per share (EPS) of $5.68 per share, which surpassed the Zacks Consensus Estimate of $5.62 by 1.1%. The metric grew 4.6% year over year.

Net sales of $1,373.3 million (the highest quarter in the company’s history) lagged the consensus mark of $1,397 million by 1.7% but increased 3.6% year over year. Mergers and acquisitions (M&A), after accounting for a disposition, led to a 2.3% increase, with prices and volume rising by 1% and 0.4%, respectively.

BLD’s Segmental Performance

Installation (which accounted for 62.3% of total net sales): The segment’s net revenues came in at $856.4 million, up 4.2% year over year. Residential sales for the segment improved slightly from the second quarter and grew 3.7% compared to the prior year, driven by M&A and single-family growth. However, the growth was partially offset by slower multi-family sales. Commercial sales also showed a slight improvement from the second quarter, growing 6.8% year over year, driven by M&A and the timing of projects. M&A contributed 2.7% to the sales increase, pricing added 1.1%, and volume rose 0.5%. The segment’s adjusted operating margin contracted 150 basis points (bps) year over year to 20.1%.

Specialty Distribution (43.4%): The segment’s net sales rose 5.1% year over year to $600.4 million. Volume improved 3.0%, while pricing and acquisitions contributed 0.8% and 1.4%, respectively, to sales. The segment’s residential sales improved slightly sequentially and grew 8.5% compared to the prior year. Sales to the commercial and industrial end markets slowed slightly sequentially but grew 2.9% on a year-over-year basis. The segment’s adjusted operating margin improved 30 bps year over year to 15.8%.

Operating Highlights of BLD

Adjusted gross margin contracted 100 bps year over year to 30.7%. Adjusted SG&A expenses, as a percentage of sales, decreased 40 bps to 12.8% from a year ago. Adjusted operating margin declined 60 bps to 17.9% from a year ago.

Adjusted EBITDA improved 0.4% year over year to $285.1 million. However, adjusted EBITDA margin contracted 60 bps to 20.8% from the year-ago figure.

BLD’s Financials

As of Sept. 30, 2024, TopBuild had cash and cash equivalents of $257.3 million compared with $848.6 million at 2023-end. Long-term debt at the third quarter of 2024-end was $1.34 billion, down from $1.37 billion at 2023-end.

Net cash provided by operations was $509.8 million in the first nine months of 2024, down from $588.5 million a year ago.

As of Sept. 30, 2024, BLD repurchased around 2.3 million shares for a total of $919.2 million.

TopBuild's Acquisitions So Far in 2024

Year to date, BLD has acquired seven companies, which are projected to generate approximately $118 million in annual revenues. The acquisitions include Brabble Insulation, with annual revenues of $5.2 million, closed in February and included in the Installation segment; Morris Black & Sons, generating $3.8 million in annual revenues, closed in March and part of the Installation segment and Pest Control Insulation, with $25.4 million in annual revenues, closed in March and included in the Distribution segment.

The other buyouts were that of Green Space Insulation, with $6 million in annual revenues, closed in April and part of the Installation segment; Insulation Works, generating $28 million in annual revenues, closed in May and included in the Installation segment; Texas Insulation, with annual revenues of $38.9 million, closed in May and part of the Installation segment; and Shannon Global Energy Services, with $10.8 million in annual revenues, which is expected to close in the fourth quarter and be included in the Distribution segment.

BLD’s 2024 Guidance Narrowed

TopBuild now expects net sales between $5.30 and $5.35 billion versus $5.30 billion-$5.50 billion of earlier expectations. The estimated figure indicates an increase from $5.19 billion reported in 2023.

Adjusted EBITDA is now projected to be between $1.055 billion and $1.085 billion versus $1.055 billion-$1.125 billion of the prior projection. This suggests growth (considering the midpoint of the guided range) from $1.05 billion reported in 2023.

BLD’s Zacks Rank

TopBuild currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Construction Releases

Quanta Services Inc. PWR reported mixed results for the third quarter of 2024, wherein adjusted earnings beat the Zacks Consensus Estimate, but revenues missed the same.

Quanta reported a strong quarter with double-digit growth across key financial metrics, a record backlog of $34 billion and $539.5 million in free cash flow. CEO Duke Austin attributed this growth to Quanta’s diverse portfolio, high demand, effective execution and an expanding market.

Masco Corporation MAS reported third-quarter 2024 results, wherein earnings met the Zacks Consensus Estimate and net sales marginally beat the same. Strong operational efficiency helped it deliver strong earnings amid challenging market conditions.

Masco lowered the upper limit of its 2024 adjusted EPS guidance due to challenged market demand.

Armstrong World Industries, Inc. AWI reported solid results for the third quarter of 2024, wherein earnings and net sales topped the Zacks Consensus Estimate and increased on a year-over-year basis.

Given the solid third-quarter results and improved line of sight for the full year, Armstrong World raised its 2024 guidance for adjusted EBITDA, adjusted EPS and adjusted free cash flow.

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