Supply chain problems and higher raw materials costs caused building products manufacturer Jeld-Wen Holdings (JELD 0.22%) to miss first-quarter earnings expectations. Investors weren't pleased, sending shares down more than 10% on Monday morning.
Jeld-Wen is a maker of finished building products including windows, doors, and wall systems, and investors knew going into earnings season that the company was both a likely beneficiary of the housing push and also likely caught up in the supply difficulties that have plagued homebuilders. But the results were worse than expected. Jeld-Wen reported first-quarter earnings of $0.16 per share on revenue of $1.17 billion, short of the consensus estimate of $0.33 per share on revenue of $1.2 billion.
Revenue increased 12.9% in North America due to strong demand and was up slightly in Europe, but the company's "Australasia" region saw a net revenue decline of 5.2% due to the impact of foreign exchange. Net cash used in operations totaled $186.9 million in the quarter, compared to $64.9 million in the first quarter of 2021, due to higher working capital and lower net income in the latest period.
CEO Gary S. Michel in a statement said that "material increases in raw material, freight and labor inflation had a significant impact" on earnings.
Michel said Jeld-Wen remains "laser-focused" on market-beating growth and sees opportunities to expand margins. "Given our strong order books, end market demand and initiatives in progress to drive profitable growth, we remain confident in our ability to deliver our 2022 and long-term financial commitments," Michel said.
That's good to hear, but investors are likely mindful of the uncertainty facing the entire homebuilding and renovation market as interest rates rise and home affordability dynamics change. Throw higher rates into the mix along with the logistics and commodity inflation Jeld-Wen is facing, and it is tough to say what the next few quarters will look like.
Jeld-Wen is a solid business in a market with strong long-term growth potential, but given the levels of near-term uncertainty, investors appear to be in no mood to hang on to the stock after earnings.