What happened
Cornerstone Building Products (CNR) delivered a solid quarter, easily beating consensus estimates. The market, however, appears unimpressed, with shares of Cornerstone down more than 12% as of 1 p.m. EDT Wednesday.
So what
Cornerstone, a maker of exterior building products including vinyl windows, stone veneer, and metal panels for residential and non-residential buildings, earned $0.67 per share in the second quarter on revenue of $1.4 billion. The sales number hit analyst expectations, but the profit number was more than double the $0.31 per-share consensus.
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Net sales were up 29% year over year and 8% above the second quarter of 2019 as Cornerstone benefited from strong housing demand that is prompting homebuilders to boost building levels.
But it is also a period of transition for Cornerstone. The company has agreements in place to sell its insulated metal panels business to a unit of Nucor and its roll-up sheet doors business to Janus International Group for combined consideration of $1.2 billion in cash. It is also in the process of acquiring Cascade Windows for $245 million. And on Wednesday morning, Cornerstone announced CEO James S. Metcalf would retire. Metcalf will continue as executive chairman through March 2022.
Now what
The new CEO, Rose Lee, appears to be well qualified. She has a long career in manufacturing, including with DuPont de Nemours, and with Metcalf staying on for a year as executive chairman it should be an orderly transition. Cornerstone also forecast year-over-year growth in the third quarter, saying it expects sales of between $1.38 billion and $1.43 billion compared to $1.19 billion, after accounting for acquisitions and divestitures, in 2020.
But Cornerstone shares are up more than 130% over the past year even with Wednesday's drop, and investors seem to be of the opinion that the last few months are about as good as it is going to get this cycle for the homebuilding and construction materials sectors. Following earnings, investors appear to be moving on from the stock.
