Builders FirstSource, Inc.’s BLDR lackluster fourth-quarter 2024 results reflected tepid sales trends in the Value-Added product category and reduced operating leverage amid an uncertain housing environment. The reduced housing starts scenario, given the ongoing affordability challenges and uncertainty around potential policy changes, marred the quarter’s uptrend.

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The company’s adjusted earnings of $2.31 per share surpassed the Zacks Consensus Estimate by 3.1%, while the net sales of $3.82 billion missed the mark by 2.4%. Although the bottom line topped the consensus mark, it tumbled year over year by 34.9% on an 8% lower top line during the quarter. The quarter’s adjusted EBITDA margin contracted 360 basis points (bps) year over year to 12.9%, due to lower gross margin and reduced operating leverage. However, lower operating expenses after adjustments partially eased the downtrend during the quarter. (read more: Builders FirstSource Q4 Earnings Beat Estimates, Net Sales Miss)

Soft Sales Trends for Value-Added Products Mar BLDR’s Prospects

The Value-Added Product category (accounting for 49.7% of fourth-quarter net sales), comprises two sub-categories, manufactured products and windows, doors and millwork. This product category, being the largest sales contributor, witnessed a pullback in the fourth quarter by 12% to $1.9 billion compared with last year. Within this category, the sales for manufactured products were down 18.9% year over year to $899.6 million, while the same for windows, doors and millwork tumbled 4.7% to $997.8 million compared with a year ago. A decline in multi-family trusses, along with lower vendor prices and decreased demand volumes, triggered the quarterly downtrend.

As multi-family represents about 9-10% of the company’s net sales, signs of demand uncertainty will adversely impact the top-line growth, which was witnessed during the fourth quarter. Moreover, the demand softness in the housing market also reduced single-family starts, which added to the quarterly headwinds.

Although the company enacted various initiatives like aligning capacity across its facilities, reducing headcount and managing expenses to counter the lower volumes, the negative impact of the ongoing macro scenario burdened its quarterly performance.

BLDR’s Efforts to Counter the Housing Market Uncertainty

Moving into 2025, Builders FirstSource expects the housing market uncertainty to linger, with the multi-family housing trends remaining a core headwind. To counter these adverse impacts, the company continues to invest in a product portfolio that enables it to offer cost-flexible options to builders. It aims to continue supplying lower-cost offerings in products like EWP, windows and doors to help alleviate affordability challenges.

Furthermore, the company’s efforts in investing in high-return opportunities that augment its value-added product offerings are notable in this uncertain market condition. In 2024, it invested more than $75 million in its value-added facilities, which included opening two new truss manufacturing facilities, upgrading 19 truss facilities and enhancing 13 millwork locations. These strategic investments are expected to drive growth in the upcoming period.

BLDR’s Mixed 2025 Outlook

Builders FirstSource expects full-year net sales to range between $16.5 billion and $17.5 billion compared with $16.4 billion reported in 2024.

The gross margin is expected to range between 30% and 32%, down from 32.8% reported in 2024.

Consolidated adjusted EBITDA is expected between $1.9 billion and $2.3 billion compared with $2.3 billion in 2024. Adjusted EBITDA margin is expected between 11.5% and 13%, down from 14.2% reported in 2024.

Although the top line is expected to improve year over year, the margins are expected to pull back because of lingering inflationary pressures, increased investments and reduced operating leverage.

BLDR’s Zacks Rank & Recent Retail-Wholesale Releases

Builders FirstSource currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Restaurant Brands International, Inc. QSR reported fourth-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis.

During the quarter, consolidated comps increased 2.5% year over year and net restaurants grew 3.4% year over year. Global system-wide sales rose 5.6% year over year. QSR unveiled its long-term consolidated performance expectations from 2024 to 2028. It anticipates achieving more than 3% growth in comparable sales and at least 5% net restaurant growth.

McDonald's Corporation MCD reported fourth-quarter 2024 results, wherein earnings were in line with the Zacks Consensus Estimate but revenues missed the same. Both the top and bottom lines decreased year over year. Its Accelerating-the-Arches strategy remains the right approach for expanding market share.

At company-operated restaurants, sales were $2.31 billion, down 7% year over year. Sales at franchise-operated restaurants amounted to $3.95 billion, which increased 2% year over year. The global comps increased 0.4% compared with 3.4% growth in the prior-year quarter. MCD’s comps increased after witnessing a decline in the preceding two quarters.

YUM! Brands, Inc. YUM reported fourth-quarter 2024 results, with adjusted earnings and total revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis.

The company’s top-line performance reflected solid contributions from the KFC, Pizza Hut and Taco Bell divisions. It reported progress in the digital space, with digital sales rising approximately 15% and the digital mix surpassing 50%, moving closer to its long-term goal of 100% digital sales. Worldwide system sales — excluding foreign currency translation — grew 8% year over year, with Taco Bell increasing 14% and KFC rising 6%. The metric rose 3% year over year for Pizza Hut.

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