Builders FirstSource (NYSE:BLDR) Misses Q4 Revenue Estimates, Stock Drops

Builders FirstSource (NYSE:BLDR), a leading manufacturer and supplier of building materials, reported its fourth quarter and full-year 2024 results on February 20, 2025. The company missed analysts' revenue estimates for both the quarter and the full year, leading to a decline in its stock price. This article will delve into the reasons behind the missed estimates and the subsequent stock drop, as well as the market's sentiment towards the company heading into earnings.

Missed Revenue Estimates and Stock Drop

Builders FirstSource reported revenue of $3.8 billion for Q4, falling short of the estimated $3.9 billion, marking an 8.0% decrease year-over-year due to lower core organic sales and commodity deflation. The company's earnings per share (EPS) also missed estimates, reporting $1.65 for Q4 compared to the estimated EPS of $1.83. The net income for the quarter was $190.2 million, a 45.8% decrease from the previous year, primarily driven by reduced gross profit margins.

The company's stock price dropped following the earnings release, reflecting investors' concerns about the missed revenue estimates and the decline in profitability. Builders FirstSource's stock is down 11.8% over the last month, underperforming the average decline of 4.2% for home construction materials stocks.

Factors Contributing to the Missed Estimates

Several factors contributed to Builders FirstSource's missed revenue estimates and the subsequent stock drop:

1. Lower Core Organic Sales: The company experienced a decline in core organic net sales of 1.3% compared to the previous year. This was driven by a 3.5% decrease in the Single-Family segment, while Multi-Family and Repair and Remodel (R&R)/Other segments increased by 4.3% and 4.2%, respectively. On a weighted basis, the decline in Single-Family reduced sales by 2.5%, while the increases in Multi-Family and R&R/Other increased sales by 0.5% and 0.7%, respectively.
2. Commodity Deflation: The company faced commodity deflation of 5.0%, which also contributed to the revenue miss. This factor was partially offset by growth from acquisitions of 1.6%.
3. Gross Margin Decline: Builders FirstSource's gross margin decreased by 300 basis points to 32.3% in Q4, influenced by margin normalization in Single-Family and Multi-Family segments. This decrease in gross margins negatively impacted the company's profitability.

Market Sentiment and Peer Performance

The market's sentiment towards Builders FirstSource heading into earnings is mixed, with some optimism but also concerns about the company's recent performance. While some of the company's peers in the home construction materials segment have shown solid performance, Builders FirstSource has underperformed. Simpson delivered year-on-year revenue growth of 3.1%, beating analysts' expectations by 4.3%, and traded up 1.5% following the results. Griffon reported a revenue decline of 1.7%, falling short of estimates by 0.8%, but the stock was also up 8.8%.

Conclusion

Builders FirstSource's missed revenue estimates and subsequent stock drop reflect the challenges the company faces in the current market environment. The decline in core organic sales, commodity deflation, and gross margin decrease contributed to the missed estimates. While the market's sentiment towards the company is mixed, investors should be cautious about Builders FirstSource's long-term prospects, given the company's recent performance and the broader economic trends affecting the housing market. As the company navigates these challenges, investors should closely monitor its progress and the market's reaction to its future earnings reports.