Wrapping up Q2 earnings, we look at the numbers and key takeaways for the building materials stocks, including Armstrong World (NYSE:AWI) and its peers.
Traditionally, building materials companies have built competitive advantages with economies of scale, brand recognition, and strong relationships with builders and contractors. More recently, advances to address labor availability and job site productivity have spurred innovation. Additionally, companies in the space that can produce more energy-efficient materials have opportunities to take share. However, these companies are at the whim of construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates. Additionally, the costs of raw materials can be driven by a myriad of worldwide factors and greatly influence the profitability of building materials companies.
The 8 building materials stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 2.9% above.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
Luckily, building materials stocks have performed well with share prices up 14% on average since the latest earnings results.
Armstrong World (NYSE:AWI)
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE:AWI) provides ceiling and wall products to commercial and residential spaces.
Armstrong World reported revenues of $365.1 million, up 12.2% year on year. This print exceeded analysts’ expectations by 1.3%. Overall, it was a satisfactory quarter for the company with full-year revenue guidance beating analysts’ expectations but a miss of analysts’ organic revenue estimates.
“With double digit net sales growth and record earnings, our second-quarter results further demonstrate the resilience of our business model and the strength of our growth initiatives,” said Vic Grizzle, President and CEO of Armstrong World Industries.
Armstrong World Total Revenue
Armstrong World scored the fastest revenue growth of the whole group. Even though it had a great quarter relative to its peers, the market seems discontent with the results. The stock is down 0.3% since reporting and currently trades at $126.73.
Beginning as a lumber supplier in the 1950s, UFP (NASDAQ:UFPI) makes a wide range of building materials for the construction, retail, and industrial sectors
UFP reported revenues of $1.90 billion, down 6.9% year on year, outperforming analysts’ expectations by 1.6%. The business had a very strong quarter with an impressive beat of analysts’ volume estimates and a decent beat of analysts’ operating margin estimates.
UFP Total Revenue
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $126.73.
The first-ever Colombian company to trade on the NASDAQ, Tecnoglass (NYSE:TGLS) is a manufacturer of architectural glass, windows, and aluminum products.
Tecnoglass reported revenues of $219.7 million, down 2.5% year on year, in line with analysts’ expectations. It was a mixed quarter as it posted full-year revenue guidance beating analysts’ expectations but a miss of analysts’ operating margin estimates.
Interestingly, the stock is up 42.1% since the results and currently trades at $67.57.
Credited with an invention in the 1950s that improved crop yields, Valmont (NYSE:VMI) provides engineered products and infrastructure services for the agricultural industry.
Valmont reported revenues of $1.04 billion, flat year on year. This number was in line with analysts’ expectations. Overall, it was a strong quarter as it also logged an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ earnings estimates.
The stock is up 3.3% since reporting and currently trades at $280.24.
Resideo Technologies, Inc. (NYSE: REZI) is a manufacturer and distributor of technology-driven products and solutions for home comfort, energy management, water management, and safety and security.
Resideo reported revenues of $1.59 billion, flat year on year. This print surpassed analysts’ expectations by 3.6%. Overall, it was a strong quarter as it also produced revenue guidance for next quarter exceeding analysts’ expectations and a decent beat of analysts’ ADI Global Distribution revenue estimates.
Resideo delivered the highest full-year guidance raise among its peers. The stock is up 4.6% since reporting and currently trades at $20.11.
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