Loss Narrows at NCI Building - Analyst Blog

NCI Building Systems Inc. NCS posted adjusted loss per share of 5 cents in the first quarter of fiscal 2014, compared with the prior-year quarter loss of 19 cents. This compared unfavorably with the Zacks Consensus Estimate of gain per share of one cent.  

Including one-time items, the company's earnings per share was 6 cents in the reported quarter, compared with 19 cents in the year-ago quarter.

Operational Update

Sales climbed 4.4% year over year to $311 million in the first quarter. Revenues lagged the Zacks Consensus Estimate of $316 million. The improvement was mainly driven by higher third-party sales in each of the operating segments. Backlog at the end of the quarter was $310.8 million, up 3.5% year over year.

Cost of sales during the quarter increased 6.6% to $252 million. Adjusted gross profit fell 1.1% to $60.2 million from $60.9 million in the year-ago quarter. The decrease was largely due to rough weather conditions, which resulted in 17 plant closure days, delayed incoming material deliveries and outgoing product shipments as well as higher utility expenses. Consequently, gross margin contracted 100 basis points to 19.4% in the quarter.

Engineering, selling, general and administrative expenses increased 3.2% to $62.4 million. The company reported an adjusted operating loss of $3.4 million in the quarter, compared with an operating profit of $0.4 million the prior-year quarter.

Segment Performance

Revenues at Engineered Building Systems increased 3.2% year over year to $152 million. The segment reported an adjusted operating income of $1.6 million, down from the year-ago quarter income of $4 million. This was mainly due to rise in both manufacturing and transportation costs caused by unfavorable weather and supply chain disruptions.

Revenues from the Metal Coil Coating segment climbed 10% year over year to $54 million, led by strong demand and market share growth in external sales of light gauge coated shipments. Adjusted operating profit was flat at $5.5 million as compared with the prior-year quarter.

The Metal Component segment generated revenues of $158 million, up 2.8% year over year. Adjusted operating profit for the segment decreased 32% to $4.1 million due to increased shipments of lower margin cold storage insulated metal panels and reduced shipments of higher margin architectural insulated metal panels.

Financial Update

As of Feb 2, 2014, the company had cash and cash equivalents of $16.6 million, down from $77.4 million as of Nov 3, 2013. Long-term debt remained unchanged at $235 million as of Feb 2, 2014, as compared with the year-earlier quarter.

Cash flow used in operating activities was $33.9 million in first-quarter fiscal 2014 ended Feb 2, 2014 as compared with $13 million in the prior-year comparable period.

Outlook

Management did not provide any specific guidance for fiscal 2014. The main indicators for non-residential construction activity continue to trend positive. The company noted that business conditions at architectural firms have steadily improved in the past several quarters, which point toward single-digit year-over-year growth in non-residential new construction in 2014.

Furthermore, the recent booking trends seem to support this momentum. The company anticipates improved margins in fiscal 2014 driven by greater commercial discipline, manufacturing efficiencies and volume-driven operating leverage.

Headquartered in Texas, NCI Building Systems is a leading integrated manufacturer of metal products in the North American non-residential construction industry.

Currently, NCI Building Systems carries a Zacks Rank #5 (Strong Sell). However, some better-ranked stocks in the same sector include CaesarStone Sdot-Yam Ltd. CSTE, USG Corporation USG and Wolseley plc (WOSYY). While CaesarStone sports a Zacks Rank #1 (Strong Buy), USG Corporation and Wolseley have a Zacks Rank #2 (Buy).