NCI Building (NCS) Beats Q3 Earnings & Revenue Estimates

NCI Building Systems Inc. (NYSE:NCS) posted adjusted earnings of 33 cents per share for the third quarter of fiscal 2016 (ended Jul 31, 2016), which is a surge of 120% from 15 cents in the prior-year quarter. Earnings comfortably beat the Zacks Consensus Estimate of 26 cents.

Including one-time items, the company reported earnings per share of 32 cents compared to 10 cents a share in the prior-year quarter.

Operational Update

Sales rose 9.9% year over year to $462 million in the quarter, which came in line with the management’s guidance range of between $458 million and $469 million. Revenues also surpassed the Zacks Consensus Estimate of $454 million. The year over year growth was boosted by increased volumes across all three segments.

Cost of sales increased to $334.5 million from $319 million in the year-ago quarter. Gross profit grew 25.8% year over year to $127.9 million. Consequently, gross margin expanded 350 basis points to 27.7% in the quarter, accelerated by increased operating leverage from higher volumes complemented by a continued focus on commercial discipline, supply chain effectiveness and manufacturing efficiency.

Engineering, selling, general and administrative expenses increased 7.9% to $80.4 million, mainly due to higher incentive compensation charges and higher selling costs resulting from increased volume. The company reported adjusted operating income of $45.1 million, which surged around 79% from $25.2 million in the prior-year quarter led by improved revenues and gross profit margins.

Segment Performance

Revenues at the Building Systems segment increased to $175.5 million from $172.2 million in the year-ago quarter. The segment reported adjusted operating income of $19.6 million, a 35.3% rise from $14.5 million in the year-ago quarter.

The Coatings division reported revenues of $30.7 million, up 15.3% year over year. Adjusted operating profit improved 59% year over year to $8.7 million, supported by increased operating leverage from higher total volumes processed.

The Component segment’s revenues increased 15.4% year over year to $256 million led by both the traditional metal component product lines and the insulated metal panel products. On an adjusted basis, operating profit increased 75% year over year to $37.8 million, driven by a combination of effective supply chain management and commercial discipline as well as an improving product mix in insulated metal panels.

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Financial Update

At the end of the third quarter of fiscal 2016, NCI Building had cash and cash equivalents of $50.7 million compared with $99.7 million as of Nov 1, 2015. The company reported cash from operations of $40.6 million for the nine-month period ended Jul 31, 2016 compared with $38.6 million in the comparable year-ago period. Long-term debt was $414 million as of Jul 31, 2016, compared with $444 million as of Nov 1, 2015. NCI Building’s consolidated backlog increased 10% to $557.5 million at the end of the quarter.