Building Products Distributor GMS' Q2 Profit & Sales Slip, Hit By Deflationary Steel Pricing & Reduced Single-Family Demand: Details

GMS Inc GMS reported second-quarter FY24 net sales of $1.42 billion, a slight decline of 0.7% year-over-year and down 3.1% organically, beating the consensus of $1.38 billion.

The specialty building products distributor's adjusted EPS of $2.30 beat the consensus of $2.26.

In the U.S., Wallboard volume growth of 17.0% in multi-family and 6.5% in commercial helped to offset single-family volume declines of 11.4%.

Sales by product category: Wallboard $585.2 million (+0.1% Y/Y), Ceiling $175.3 million (+9.9% Y/Y), Steel Farming $232.1 million (-16.6% Y/Y), and Complementary Product $428.3 million (+4.8% Y/Y).

Gross profit declined 1.3% Y/Y to $458.63 million, and the margin contracted 20 basis points to 32.3%.

Operating margin declined by 193 bps to 8.8% for the quarter, with an operating income of $124.79 million (-18.6% Y/Y).

Adjusted EBITDA fell by 14,3% Y/Y to $167.56 million, with margins contracting 187 bps to 11.8%.

Operating cash flow for the six months totaled $124.75 million vs. $102.86 million a year ago, with a free cash flow of $95.2 million.

Net debt leverage was 1.5 times, improved from 1.6 times a year ago.

As of October 31, 2023, GMS held $76.52 million in cash and equivalents.

GMS repurchased 688,717 shares of common stock for $44.3 million, of which $8.7 million was purchased under the new and expanded authorization. 

"In the near term, we anticipate the backlog in multi-family construction to drive continued growth in this end market through the end of fiscal 2024, albeit at declining year-over-year rates. Despite some potential headwinds from tightened credit conditions, our commercial demand is expected to continue its current pace of activity over the next few quarters," said John C. Turner, Jr., President and Chief Executive Officer of GMS.

"Additionally, we are optimistic about improving single-family activity, as the very recent easing of mortgage rates, limited supply of existing homes for sale and favorable demographics seem to be setting up improved conditions, particularly as we look out to fiscal 2025," added Turner.

Price Action: GMS shares traded lower by 4.79% at $68.94 on the last check Thursday.

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