TopBuild Stock Gains on Q3 Earnings Beat, Sales Lag Estimates

Core Insights - TopBuild Corp. reported mixed results for Q3 2024, with earnings exceeding estimates while sales fell short, yet both metrics showed year-over-year growth driven by pricing and increased volumes [1][4][3] Financial Performance - Adjusted EPS was $5.68, surpassing the Zacks Consensus Estimate of $5.62 by 1.1%, and grew 4.6% year over year [4] - Net sales reached $1,373.3 million, the highest in the company's history, but missed the consensus mark of $1,397 million by 1.7%, reflecting a 3.6% year-over-year increase [4] - Adjusted EBITDA improved 0.4% year over year to $285.1 million, although the adjusted EBITDA margin contracted 60 basis points to 20.8% [7] Segment Performance - Installation segment, accounting for 62.3% of total net sales, reported revenues of $856.4 million, up 4.2% year over year, with residential sales growing 3.7% [5] - Specialty Distribution segment, representing 43.4% of net sales, saw a 5.1% year-over-year increase to $600.4 million, with residential sales improving 8.5% compared to the prior year [6] Operational Highlights - Adjusted gross margin contracted 100 basis points year over year to 30.7%, while adjusted SG&A expenses decreased 40 basis points to 12.8% [7] - As of September 30, 2024, TopBuild had cash and cash equivalents of $257.3 million, down from $848.6 million at the end of 2023, and long-term debt decreased to $1.34 billion [7][8] Acquisitions - Year-to-date, TopBuild has acquired seven companies projected to generate approximately $118 million in annual revenues, including notable acquisitions in both the Installation and Distribution segments [9][10] Guidance - The company narrowed its 2024 guidance for net sales to between $5.30 billion and $5.35 billion, indicating growth from $5.19 billion reported in 2023 [11] - Adjusted EBITDA is now projected to be between $1.055 billion and $1.085 billion, suggesting growth from $1.05 billion reported in 2023 [11]