GMS Inc. GMS reported mixed results for second-quarter fiscal 2025 (ended Oct. 31, 2024), wherein its earnings missed the Zacks Consensus Estimate and net sales surpassed the same. The top line grew, while the bottom line declined year over year.

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The quarterly results indicate volume growth (including acquisitions) and resilient pricing in most of the company’s main product lines, partially offset by reduced activity levels across all its end markets. This was due to the ongoing economic uncertainties, steel price deflation and Hurricane-related impacts. GMS expects the ongoing economic uncertainties to continue into the new calendar year and is bracing itself accordingly to counter the adverse impacts.

Following the results, the company’s shares lost 4.4% during yesterday’s trading session.

Despite overall softening in end markets, the company observed areas of relative strength in certain commercial sectors. Activity remained steady in data centers, education, healthcare and projects, supported by government programs, including the CHIPS Act and Inflation Reduction Act.

The company is focused on executing its strategic priorities, including expanding GMS’ platform through acquisitions and greenfield opportunities while maintaining disciplined capital allocation. GMS has been also enhancing its product and service offerings and improving profitability by using technology and best practices to drive productivity. These efforts aim to support long-term success and provide its customers with high-quality products and services.

GMS’ Quarterly Results in Details

GMS reported adjusted earnings per share (EPS) of $2.02, which missed the Zacks Consensus Estimate of $2.26 by 10.6%. In the year-ago quarter, it reported an adjusted EPS of $2.30.

Net sales of $1.47 billion beat the consensus mark of $1.45 billion by 1.1% and increased 3.5% year over year.

Organic net sales declined 4.6% from the prior year. Volume growth across all major product lines was partially offset by weaker multi-family activity and reduced commercial shipments. Hurricane-related disruptions significantly affected one of the company's largest and fastest-growing regions during the quarter. These challenges led to operational inefficiencies and lower demand, especially for Wallboard products.

On a per-day basis, net sales were up 3.5% year over year (4.6% organically).

Performance of GMS’ Segments

Wallboard sales inched down 0.5% from a year ago to $582.1 million. Organically, sales were down 5.2% year over year.

Ceilings sales increased 16.6% year over year to $204.4 million. Organically, this segment’s sales rose 1.6% from the year-ago quarter.

Steel Framing sales of $217.4 million declined 6.3% from the prior-year quarter. Organically, the segment’s sales moved down 14% from the year-ago figure.

Complementary Product sales grew 9% from the prior-year period to $466.8 million. Organically, sales declined 1.4% from the year-ago period.

GMS’ Operating Highlights

Gross profit increased 0.5% from the year-ago period to $461.1 million. The gross margin contracted 90 basis points (bps) year over year to 31.4%. This downside was due to unrealized manufacturer purchasing incentives, operational challenges impacting the cost of sales, price and cost dynamics in the Wallboard segment, and a shift from commercial and multi-family to single-family Wallboard deliveries.

Adjusted selling, general and administrative expenses, as a percentage of net sales, grew 50 bps to 20.6%.

Adjusted EBITDA of $152.2 million decreased 9.2% from a year ago. Adjusted EBITDA margin of 10.3% contracted 150 bps from 11.8% a year ago.

GMS' Financials

As of Oct. 31, 2024, the company had cash and cash equivalents of $83.9 million, down from $166.1 million at the end of fiscal 2024. As of the fiscal second-quarter end, available liquidity under GMS’ revolving credit facilities was $458.6 million. Long-term debt (less the current portions) amounted to $1.43 billion at the fiscal second-quarter end, up from $1.23 billion at the end of fiscal 2024.

Cash provided by operating activities was $92.7 million as of the first six months of fiscal 2025 compared with $124.7 million in the comparable year-ago period.

During the fiscal second quarter, GMS repurchased 593,168 shares of common stock for $52.3 million. As of Oct. 31, 2024, it had $102 million of share repurchase authorization remaining.

The board of directors renewed the company’s share repurchase program after the quarter ended. The authorization allows the company to buy back up to $250 million of its outstanding common stock.

GMS' Zacks Rank & Recent Retail-Wholesale Releases

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

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