GMS Surpasses Q4 Sales Expectations, Faces Near-Term Challenges in Wallboard And Steel Margins

GMS Inc. GMS reported fourth-quarter fiscal 2024 net sales of $1.413 billion, an 8.4% year-over-year growth and 4% organic growth, beating the consensus of $1.403 billion.

The increase in sales was driven by volume growth across major product lines, although a deflation in steel prices partially offset this.

The specialty building products distributor’s adjusted EPS of $1.93 missed the consensus of $2.04.

Single-family year-over-year Wallboard volume growth for the fourth quarter turned positive for the first time since the fall of 2022.

Sales by product category: Wallboard $586.1 million (+7.6% Y/Y), Ceiling $188.9 million (+21.7% Y/Y), Steel Farming $220.5 million (-1.5% Y/Y), and Complementary Product $417.6 million (+9.8% Y/Y).

Gross profit rose 6.3% Y/Y to $451.198 million, and the margin contracted 60 basis points to 31.9%. Operating margin declined by 165 bps to 7.1% for the quarter, with an operating income of $100.08 million (-12.1% Y/Y).

Adjusted EBITDA stood at $146.6 million for the quarter compared to $154.3 million a year ago, and the margin contracted by 140 bps to 10.4%.

Operating cash flow for the fiscal year totaled $433.249 million, compared to $441.737 million a year ago, and free cash flow was $376 million.

Net debt leverage was 1.7 times Adjusted EBITDA, improved from 1.4 times a year ago. As of April-end, GMS held $166.1 million in cash and equivalents.

“Solid levels of multi-family construction remained in backlog and commercial project activity continued through the end of our fiscal year. Plus, single-family year-over-year Wallboard volume growth for the fourth quarter turned positive for the first time since the fall of 2022. We believe this indicates the start of a mild recovery in an end market that, with considerable pent-up demand, remains poised for a more robust recovery with the expected eventual relief in mortgage rates,” commented John C. Turner, Jr, President and Chief Executive Officer of GMS.

“While we now anticipate some near-term headwinds, particularly in Wallboard and Steel margins, we expect to deliver improvement in our second quarter and solid results for the full fiscal year,” Turner added.

GMS repurchased 174,555 shares of common stock for $16 million, leaving $200.5 million remaining in the share repurchase authorization.

Recently, GMS agreed to acquire Yvon Building Supply for up to CAD$196.5 million, with closure expected in July. Additionally, GMS acquired Howard & Sons Building Materials in Pomona, California.

Price Action: GMS shares traded lower by 6.94% at $83.48 at the last check Thursday.

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