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Gibraltar (ROCK) Tops Q1 Earnings on Benefits from RBI Deal

Premium steel and iron company Gibraltar Industries, Inc. ROCK reported robust first-quarter 2016 results.

Adjusted earnings came in at 24 cents per share surpassing the Zacks Consensus Estimate of 11 cents. The bottom line also improved substantially from year-ago income of 6 cents. The stellar performance was driven by the benefits from the company’s RBI acquisition, optimal usage of resources and greater operational efficiency.

Gibraltar Industries’ net sales were $233.7 million in the quarter, up 16.5% year over year. The company’s top line also surpassed the Zacks Consensus Estimate of $224 million.

Gross profit margin increased 660 basis points (bps) to 21.5%. Selling, general and administrative (SG&A) expenses were $36.5 million, up from $20.9 million in the prior-year quarter. Gibraltar

Industries reported an adjusted operating margin of 6.6% in the quarter, up 370 bps year over year.

Segment Details

Residential Products segment generated revenues of $100.1 million, down 6.3% year over year. Adjusted operating margin was 13.2%, up 550 bps year over year. The improvement was attributable to greater operational efficiency and early receivables from the 80/20 simplification plan.

Industrial and Infrastructure Products yielded revenues of $79.7 million, down 15% year over year. The decline stemmed from lower shipment volumes, reduced energy as well as mining activities and lower steel cost prices on customer pricing. The segment’s adjusted operating margin was 5%, up 250 bps year over year. The improvement was driven by better management of raw input expenses, superior manufacturing competence and benefits received from 80/20 simplification.

The Renewable Energy & Conservation segment’s revenues came in at $53.9 million in the quarter under review. Solid demand for RBI’s ground-mounted solar racking and commercial greenhouse goods supported the upside. The segment’s adjusted operating margin stood at 8%.

Other Financial Aspects

Gibraltar Industries exited the first quarter with cash and cash equivalents of $82.6 million, up from $68.9 million at year-end 2015. Long-term debt was $209 million, up a marginal 0.1% from that as of Dec 31, 2015.

In the quarter under review, Gibraltar Industries generated $15.4 million of cash from operating activities compared with $14.8 million utilized in the year-ago period. Capital expenditure was $1.5 million, down from $2 million in the year-ago quarter.

Outlook Issued

Going forward, Gibraltar Industries aims to improve its results through a new four-pillar growth strategy. This program involves operational improvements, product innovation, strategic acquisitions and superior portfolio management. The company also looks forward to realizing three goals in 2016, namely, improvement in earnings, effective capital deployment and increasing shareholders’ utility.

Considering the benefits of RBI acquisition and successful operational programs, Gibralter Industries anticipates earnings of 36–41 cents for second-quarter 2016. However, full-year 2016 revenue guidance has been lowered to a range of $1.04–$1.06 billion from the previous range of $1.06–$1.08 billion to account for the impact of the company’s European industrial business divestiture.

Full-year earnings are projected in a band of $1.30–$1.40 per share based on superior operational performance.

Stocks to Consider

Gibraltar Industries presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include CRH plc CRH, GCP Applied Technologies Inc. GCP and Masco Corporation MAS. All the three companies presently hold a Zacks Rank #2 (Buy).

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MASCO (MAS): Free Stock Analysis Report
 
GIBRALTAR INDUS (ROCK): Free Stock Analysis Report
 
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GCP APPLIED TEC (GCP): Free Stock Analysis Report
 
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