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Cornerstone (CNR) Q4 Earnings Beat, Pro-Forma Sales Down Y/Y

Zacks Equity Research

Cornerstone Building Brands, Inc. CNR reported better-than-expected results in fourth-quarter 2019.

The company reported adjusted earnings of 11 cents per share against the Zacks Consensus Estimate of a loss of 5 cents by 320%. The said metric was down from 55 cents per share reported in the prior-year period.

Net sales rose 116.9% year over year to $1,244.4 million in the quarter. On a pro-forma basis, net sales declined 1.8% from a year ago due to softening market demand in the Commercial segment, partially offset by strength of the Windows segment.

Cornerstone Building Brands, Inc. Price, Consensus and EPS Surprise

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

Cornerstone Building Brands, Inc. price-consensus-eps-surprise-chart | Cornerstone Building Brands, Inc. Quote

Operational Highlights

Gross margin during the reported quarter contracted 10 basis points (bps) to 23.1%. Pro-forma gross margin improved 230 bps, primarily driven by positive price, mix and realization of cost savings, which offset lower manufacturing leverage from reduced volumes.

Adjusted EBITDA came in at $158.9 million, up from $66 million reported in the year-ago quarter. Pro-forma adjusted EBITDA rose 23.6% year over year. Pro-forma adjusted EBITDA margin also improved 270 bps.

Segmental Performance

Revenues in the Commercial segment (contributing 38.4% to quarterly net sales) declined 16.7% from a year ago to $477.7 million. The segment reported operating margin of 12.3%, down 40 bps year over year.

The Siding (21.8%) segment revenues were $270.8 million. Operating margin was 5.5%.

The Windows (39.8%) segment reported revenues of $495.9 million and operating margin of 6.2% in the quarter.

Financial Update

The company ended 2019 with cash and cash equivalents of $98.4 million compared with $143.8 million recorded at 2018-end. Cash provided by operations came in at $229.6 million in 2019 compared with $82.5 million reported at 2018-end.

2019 Highlights

Adjusted earnings came in at 39 cents per share, reflecting a decline from $1.45 in 2018. Net sales were $4,889.7 million, up 144.4% from a year ago. However, pro-forma net sales declined 4.2% from 2018 to $4,906 million.

Guidance

For first-quarter 2020, Cornerstone anticipates pro-forma net sales growth in mid single digits within Windows and Siding segments, and comparatively flat sales in the Commercial segment. Adjusted EBITDA is expected between $75 million and $90 million.

For full-year 2020, capital expenditure is likely to be within 2-2.5% of net sales. Cash interest is projected to be $200 million and tax rate is estimated at 30%. The company plans to incur $25 million in restructuring costs to achieve $60 million of savings.

Zacks Rank & Peer Releases

Cornerstone — which shares space with Forterra, Inc. FRTA in the same industry — currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Martin Marietta Materials, Inc. MLM reported fourth-quarter 2019 adjusted earnings per share of $2.09, missing the Zacks Consensus Estimate of $2.18 by 4.1%. However, the reported figure increased an impressive 39.3% from the year-ago level of $1.50 per share.

Vulcan Materials Company VMC reported fourth-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate but revenues almost met the same. Earnings and revenues improved on a year-over-year basis, given solid shipment growth and strong pricing in the aggregates business. Also, robust growth in public construction demand and continued improvement in private demand added to the positives.

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