Simpson Manufacturing Up on Strong Q1 Earnings - Analyst Blog
April 28 2014 - 10:00AM
Zacks
Shares of Simpson Manufacturing Co., Inc. (SSD)
gained as much as around 3.5% in the trading session after it
reported upbeat first-quarter 2014 earnings. Its earnings per share
surged to 25 cents from 10 cents in the year-earlier quarter and
were well ahead of the Zacks Consensus Estimate of 16 cents.
Simpson Manufacturing’s shares eventually closed at $33.31 on Apr
25, gaining around 2%.
Operational Update
Total revenue increased 9.1% to $168 million from $154 million in
the year-ago quarter, surpassing the Zacks Consensus Estimate of
$139 million. The rise was primarily attributable to increased
sales in North America, Europe and Asia/Pacific segments, with
North America reporting the largest increase. North America and
Europe sales benefited from improved economic activity while Europe
and parts of the U.S. gained from a less severe winter.
Cost of sales inched up 1% year over year to $90.5 million. Gross
profit was $77.8 million, up 20% from $64.7 million in the year-ago
quarter. Gross margin improved 430 basis points (bps) to 46.2% from
the prior-year quarter.
Research and development and engineering expenses increased 16.8%
year over year to $9.7 million. Selling expenses increased
marginally to $21.8 million from $21.4 million in the prior-year
quarter. General and administrative expenses rose 3.4% year over
year to $26.9 million. Income from operations improved to $19.6
million from $9 million in the prior-year quarter.
Segment Performance
Revenues in the North American segment rose 7% to $136.9 million
from $127.7 million in the year-ago quarter. The growth was led by
increased sales in the U.S. Net sales in Canada also increased
marginally over the same period in 2013 due to increased sales
volumes. Segment profit surged 48% year over year to $22.6
million.
Total revenue for the European segment increased 16% year over year
to $27.6 million, primarily attributable to higher sales volumes
and the effects of foreign currency translations, partly offset by
lower selling prices. The segment reported a loss of $1 million,
narrower than the year-ago quarter loss of $4.2 million.
Asia/Pacific segment’s total revenue increased 42% to $3.8 million
from $2.6 million in the year-ago quarter. The segment reported a
loss of $.15 million compared with $1.18 million in the first
quarter of 2013.
Financial Position
As of Mar 31, 2014, Simpson Manufacturing’s cash and cash
equivalents were $212 million versus $142 million as of Mar 31,
2013. Simpson Manufacturing’s board of directors declared a cash
dividend of 14 cents per share, up 12% from the previous dividend.
The dividend will be paid on Jul 24, 2014.
Outlook
For 2014, Simpson Manufacturing reiterated its gross margin
projection of 44%–45%. Effective tax rate will be between 37% and
39% for 2014.
Our Take
Simpson Manufacturing will benefit from its strategic initiatives,
which include a wider offering of concrete construction products,
specialty chemicals and wood construction products, particularly
truss plate and software offerings. The company’s continued focus
on strategic acquisitions to increase product offering and
strengthen its position in different geographic regions also bode
well. To support these initiatives, the company expects to hire
more personnel and provide additional resources in 2014.
Pleasanton, CA-based Simpson Manufacturing is a leading
manufacturer of wood construction products, which include
connectors, truss plates, fastening systems, fasteners and shear
walls. The company, through its subsidiary, Simpson Strong-Tie
Company Inc., designs and engineers concrete construction products
comprising adhesives, specialty chemicals, mechanical anchors and
powder actuated tools.
At present, Simpson Manufacturing carries a Zacks Rank #1 (Strong
Buy).
Other stocks in the sector worth considering include
MasTec, Inc. (MTZ), United Rentals,
Inc. (URI) and Fluor Corporation (FLR).
While MasTec sports a Zacks Rank #1, United Rentals and Fluor
Corporation have a Zacks Rank #2 (Buy).
FLUOR CORP-NEW (FLR): Free Stock Analysis Report
MASTEC INC (MTZ): Free Stock Analysis Report
SIMPSON MFG INC (SSD): Free Stock Analysis Report
UTD RENTALS INC (URI): Free Stock Analysis Report
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