Builders FirstSource Q4 Earnings Top Estimates; Shares Slip 1.8%

Builders FirstSource, Inc. (NYSE: BLDR) has reported better-than-expected results for the fourth quarter of 2021. Its earnings exceeded the consensus estimate by 20.9%, and revenues surpassed the same by 8%.

Shares of Builders FirstSource declined 1.8% to close at $73.05 on Tuesday.

Builders FirstSource has expertise in manufacturing building materials and prefabricated components. Products along with various construction services are provided to customers in residential construction, and repair and remodeling markets. The company is headquartered in Dallas, TX.

Quarterly Highlights

Builders FirstSource reported adjusted earnings of $2.78 per share, up 115.5% from the year-ago quarter. Also, the quarterly earnings surpassed the consensus estimate of $1.91 per share.

Revenues in the quarter were $4.63 billion, above the consensus estimate of $4.29 billion. On a year-over-year basis, the top line increased 83.1% on the back of organic sales growth, commodity inflation, and benefits from the BMC merger (closed in January 2021).                   

Further, revenues from value-added products increased 128.3% year-over-year, while that from specialized products & other grew 53.3%. Revenues from lumber & lumber sheet goods marked an increase of 60% from the year-ago quarter.

The company recorded a 69.2% year-over-year increase in the cost of sales, while its gross profit expanded 122% to $1.49 billion. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) at $0.79 billion represented a hike of 208.6% from the year-ago quarter.

Annual Highlights

Builders FirstSource’s adjusted earnings of $10.32 per share in 2021 improved from $3.15 per share recorded in 2020. Revenues were $19.89 billion, reflecting year-over-year growth of 132.4%. Adjusted EBITDA in the year was $3.06 billion, up 337.1% year-over-year.

Exiting 2021, the company’s cash and cash equivalents were $0.04 billion, lower than $0.42 billion at 2020-end. Long-term debt (net of current portion) increased 83.2% to $2,926.1 million. Cash flow generated from operating activities in the year surged 570.4% year-over-year to $1.74 billion, and capital expenditure (net of proceeds) was $0.21 billion, up 106.9%.

Management’s Take

Builders FirstSource’s CEO, Dave Flitman, said, “Looking at our progress, we are clearly leveraging the strength of our industry-leading platform, national network, operating model and robust demand environment to deliver exceptional growth, profitability and free cash flow. In addition, we continued to execute on our strategic priorities to invest both organically and through M&A, while returning capital to our shareholders through share repurchases.”

He added, “With a thoughtful and disciplined approach to deploying our capital, we are transforming the homebuilding industry through our investments in digital, expanding valued-added offerings for our customers, and making strategic acquisitions that bolster and extend our industry leadership position. For 2022, we continue to expect strong demand in single-family housing and across our portfolio of value-added products and solutions.”

Guidance   

Builders FirstSource anticipates benefiting from growth in single-family and multi-family starts as well as improvements in repair & remodeling demand. Buyouts are anticipated to boost sales by 4%-5% year-over-year. Productivity synergies from the BMC merger are expected to be $150 million.

Free cash flow is predicted to be within the $1.6-$2 billion range and capital expenditure to lie within the $400-$420 million range.

Capital Deployment

During 2021, Builders FirstSource used $1.21 billion for acquisitions (net of cash acquired), $2.61 billion for repayments under revolving credit facility, and $0.55 billion for long-term debts payments.

Also, the company spent $1.71 billion on repurchasing 27.5 million of its shares. In February, the company’s board of directors approved a $1 billion share buyback program.

Analysts’ Take

Analysts are unanimously optimistic about Builders FirstSource, with the stock carrying a Strong Buy consensus rating. The average Builders FirstSource price target is $102.33, suggesting 40.08% upside potential from current levels. Over the past year, shares of Builders FirstSource have surged 67.1%.

Smart Score

Builders FirstSource scores 8 out of 10 from TipRanks’ Smart Score rating system, pointing toward a high probability of the stock outperforming market expectations.

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