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NCI Building (NCS) Q4 Earnings Beat Despite Hurricane Impact

NCI Building Systems, Inc. NCS delivered adjusted earnings of 32 cents per share for fourth-quarter fiscal 2017 (ended Oct 29, 2017), up 14% from 28 cents recorded in the prior-year quarter and also beat the Zacks Consensus Estimate of 31 cents. Earnings in the quarter were impacted by job site disruptions, uneven production flow and increased transportation costs related to the various hurricanes.

Including one-time items, the company reported earnings per share of 32 cents compared with 28 cents a share recorded in the prior-year quarter.

Operational Update

Sales edged up 1.8% year over year to $488.7 million in the quarter. The figure also beat the Zacks Consensus Estimate of $474 million. Revenues came within the company’s guided range of $470-$500 million. The year-over-year growth was driven by strength in the Components business, including the insulated metal panel product lines, offset by weakness in the Buildings systems volumes. However, the hurricanes dented sales by approximately $16 million for the quarter.

Cost of sales increased 3.6% year over year to $372 million from $359 million in the year-ago quarter. Gross profit decreased 4% year over year to $116 million. Consequently, gross margin contracted 140 basis points (bps) to 23.8% in the quarter. Lower volumes in the Buildings segment, uneven production flow and increased transportation costs as well as impact of hurricanes impacted gross profits in the quarter.

NCI Building Systems, Inc. Price, Consensus and EPS Surprise
 


NCI Building Systems, Inc. Price, Consensus and EPS Surprise | NCI Building Systems, Inc. Quote

Engineering, selling, general and administrative expenses were down 6% to $72.7 million. The company reported adjusted operating income of $41.3 million, which edged up 1% from $40.9 million recorded in the year-ago quarter. The hurricanes had a negative impact of approximately $8.5 million in the quarter. Operating margin came in at 8.4%, contracting 10 bps year over year.

Segment Performance

Revenues at the Building Systems segment declined 8% to $188 million from $204 million generated in the year-earlier quarter. The segment reported adjusted operating income of $13.7 million, a slump of 40.5% from $23.1 million in the year-ago quarter.

The Coatings division reported revenues of $73 million, up 5.4% year over year. Operating profit dipped 5.7% year over year to $6.6 million.

The Metal Component segment’s revenues moved up 8.3% year over year to $316.7 million. On an adjusted basis, operating profit improved 5.7% year over year to $32.8 million.

Financial Update

NCI Building ended fiscal 2017 quarter with cash and cash equivalents of $65.7 million as of Oct 29, 2017, compared with $65.4 million at the end of Oct 30, 2016. Cash flow from operating activities were $62.4 million in fiscal 2017, compared with $68.8 million recorded in the prior fiscal.

Long-term debt was $387.3 million as of Oct 29, 2017, compared with $396 million as of Oct 30, 2016.

NCI Building repurchased over 2.6 million shares for $37.6 million in fourth-quarter fiscal 2017. For fiscal 2017, the company repurchased 2.8 million shares at an average purchase price of $14.68.

The company’s consolidated backlog advanced 5.8% year over year to $545.6 million at the end of fiscal 2017.

Fiscal 2017 Performance

NCI Building reported adjusted earnings of 80 cents per share in fiscal 2017, up 13% year over year. Earnings beat the Zacks Consensus Estimate of 77 cents. Including one-time items, the company reported earnings per share of 77 cents compared with 70 cents a share recorded in the prior fiscal.

Sales improved 5% year over year to $1.77 billion in fiscal 2017, surpassing the Zacks Consensus Estimate of $1.76 billion. Revenues came within the company’s guided range of $1.75-$1.78 billion.

Outlook

NCI Building's two ongoing cost-saving initiatives in manufacturing consolidation and ESG&A are expected to generate $40-$50 million in cost savings reductions and efficiencies by the end of 2020.

For first-quarter fiscal 2018, NCI Building estimates revenues to be in the range of $390-$410 million and adjusted EBITDA to be in the range of $24-$34million.  Gross margins are expected to improve compared with last year due to cost structure improvements and lower anticipated headwinds from escalating steel costs.

Share Price Performance




 

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Year to date, NCI Building has outperformed its industry with respect to price performance. The stock has gained around 21.8%, while the industry recorded growth of 20.3%.

Zacks Rank & Key Picks

NCI Building currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the sector are United Rentals, Inc. URI, Armstrong World Industries Inc. AWI and Patrick Industries, Inc. PATK.

United Rentals has a long-term expected earnings growth rate of 15.6%. Its shares have rallied 54% in the past year. The company flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Patrick Industries, another Zacks Rank #1 stock, has a long-term expected earnings growth rate of 10.56%. Its shares have gained 28%, year to date.

Armstrong World Industries carries a Zacks Rank #2 (Buy) and has a long-term expected earnings growth rate of 11.69%. Its shares have gained 41%, year to date.

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NCI Building Systems, Inc. (NCS) : Free Stock Analysis Report
 
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