If you've ever had a roof replaced, you know that this is not an inexpensive project for the homeowner -- but as we learned Monday night, the converse isn't necessarily true: Roofing may not make a whole lot of money for the provider, either.
Case in point: Beacon Roofing Supply (NASDAQ:BECN) reported its fiscal Q4 2019 earnings Monday evening, and it was a swing-and-a-miss quarter. Sales, expected to come in at $2.05 billion, fell short at just $2.03 billion. Profits, anticipated at $1.21 per share adjusted for one-time items, were only $1.04.
And Beacon Roofing Supply stock is down 11.1% as of 11:20 a.m. EDT today in response.
The news wasn't all bad. Even $2.03 billion in sales, for example, set a new quarterly record for Beacon, albeit the number was up only 5% year over year. Problem was, with profit margins on those sales declining by 110 basis points -- falling to 4.4% -- about 20% of the profit that Beacon used to make on its sales eroded away.
Moreover, $1.04 per share was only a pro forma number. Actual GAAP results ended up looking much worse, falling by half to just $0.27 per diluted share.
The fourth quarter also showed a steep deceleration in the rate of sales growth at Beacon. The 5% increase in sales in Q4 was less than half the 10.7% growth rate recorded for the year as a whole.
Adding insult to injury, Beacon didn't even promise investors that things will be better next year. With CFO Joseph Nowicki planning to step down, Beacon declined to give guidance for what to expect in fiscal 2020, beyond warning that the first half of 2020 looks to be worse than the year-ago period, and that management is hoping to see things pick up later in the year.
Predictions like these can make an investor nervous -- and we're seeing those nerves reflected in Beacon's falling share price today.