Industrial product manufacturer Gibraltar Industries (ROCK +2.02%) delivered Q4 earnings that nearly matched analysts' expectations, but investors had been hoping for more. Shares of Gibraltar were down 13% as of 10:30 a.m. ET on results and guidance that failed to live up to the hype.
Mixed results from operating units
Gibraltar makes products for the renewable energy, residential, agtech, and global infrastructure markets, including roofing and ventilation products, solar racks, and greenhouses. The company has gained investor attention lately due to its exposure to some industries seen as poised for outsize growth, with the stock up almost 70% since April and priced at nearly 30 times earnings heading into its quarterly report.
The company earned $0.85 per share in the quarter on revenue of $328.8 million, which was pretty close to Wall Street's $0.86 per share on $331 million consensus estimate. Net sales were up 4.7% for Q4 and 5.1% for the year, and full-year earnings per share climbed 18%.
Gibraltar improved its operating margin by 50 basis points in 2023 and generated $218 million in operating cash flow.
The residential market, which accounts for more than half of sales, reported operating income growth of 26.9% in the quarter and a 280-basis-point improvement in margins. But margins in the renewables sector fell by 270 basis points on warranty costs, and the company's loss-making agtech unit saw margins deteriorate by 380 basis points due to charges related to a distressed cannabis customer.
Gibraltar's guidance for the new year was solid, but a bit underwhelming. The company expects full-year earnings of $4.57 to $4.82 per share. The midpoint of that range is just shy of analysts' consensus earnings estimate of $4.71 per share. The company also announced the planned 2025 retirement of CFO Timothy Murphy.
NASDAQ: ROCK
Key Data Points
Is Gibraltar a buy after its earnings report?
CEO Bill Bosway believes the one-time issues associated with renewables and agtech won't repeat this year, stating, "For 2024, we expect strong performances for all four segments." The CFO transition appears to be orderly, and given the extended period until Murphy leaves, it doesn't seem to be a sign of trouble.
Gibraltar has proven to be a volatile stock, with a recent history of running up ahead of earnings only to go sideways or down once results are released. But the long-term trajectory has been positive, with the shares delivering a market-beating 300% gain over the past decade.
This is not a stock for those who wish to avoid turbulence. But for patient investors who are willing to ride the ups and downs, Gibraltar's long-term strategy appears to be on track.
