PGT's Q1 Earnings Beat Ests - Analyst Blog

PGT, Inc.'s PGTI earnings per share for first-quarter 2014 were at 7 cents, a 17% improvement over 6 cents earned in the year-ago quarter. Results missed the Zacks Consensus Estimate by a penny.

The prior-year quarter excluded the gain from the sale of PGT's Salisbury plant. Including this, earnings in the year-ago quarter were at 9 cents. Compared with this, earnings of 7 cents in the reported quarter declined 22%.

Operational Update

Net sales in the first quarter improved 27% year over year to $62.7 million, falling short of the Zacks Consensus Estimate of $64 million. This marks the 6th straight quarter of top-line rise over 25% and the highest first-quarter sales since 2007. Sales were within the company's guided range of $62–$65 million.

Cost of sales went up 34% year over year to $43 million. Gross profit rose 13% to $19.8 million from the year-ago quarter, driven by strong revenue growth. However, gross margin contracted 390 basis points (bps) year over year to 31.5%.

Selling, general and administrative expenses increased 3% to $13.4 million from $13 million in the prior-year quarter. The company posted an operating income of $6.4 million as against an adjusted $4.5 million in the year-ago quarter.

Financial Performance

PGT ended the first quarter with cash and cash equivalents of $30.8 million, compared with $30.2 million as of 2013 end. Long-term debt of the company decreased to $71.5 million as of Mar 31, 2014 from $72.4 million as of Dec 31, 2013. Debt-to-capitalization ratio was 59% as of Mar 31, 2014 as against 61% as of Dec 31, 2013.

Our View

PGT kicked of 2014 with a strong sales performance. This growth was driven by increase in new construction sales, which continue to outpace the Florida housing market as well as marketing programs focused on its WinGuard products. The WinGuard product lines are expected to continue to deliver strong growth going forward.

The company broke ground on a new glass plant in the quarter. This plant, which is expected to be completed by the end of the third quarter of 2014, will help to increase in-house glass capacities and reduce reliance on outsourced finished glass. It is estimated that this initiative will improve gross margins by approximately 2% in 2014.

North Venice, FL-based PGT is a leading U.S. manufacturer and supplier of residential impact-resistant windows and doors. PGT's product line includes a variety of aluminum and vinyl windows and doors, which are ideal for new construction and replacement projects serving the residential, commercial, high-rise and institutional markets.

PGT currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Simpson Manufacturing Co., Inc. SSD, United Rentals, Inc. URI and Aegion Corporation AEGN. While Simpson Manufacturing and United Rentals sport a Zacks Rank #1 (Strong Buy), Aegion holds a Zacks Rank #2 (Buy).