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Category: Stock Market and Cornerstone
Date: 6 November 2019 Stock Price: $6.87 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Cornerstone Building Brands, the largest manufacturer of exterior building products in the United States.
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About Cornerstone Building Brands
Cornerstone Building Brands is the largest manufacturer of exterior building products in North America. Headquartered in Cary, North Carolina, the organization serves residential and commercial customers across new construction and the repair & remodel markets. As the #1 manufacturer of windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories, Cornerstone Building Brands combines a comprehensive portfolio of products with an expansive national footprint that includes more than 21,000 employees at manufacturing, distribution and office locations throughout North America.
The image below shows a map of affiliated builders for Cornerstone Building Brands.
The image below shows a map of affiliated builders for Cornerstone Building Brands.
Financial overview of Cornerstone's latest earnings report
The numbers we are interested in (for the quarter):
- Net sales of $1.285 billion
- Cost of sales: $975.240 million
- Net income of $24.790 million
- Diluted income per share: $0.20
- Diluted number of shares outstanding: 125.558 million
- Cash and cash equivalents: $105.244 million
- Cash and cash equivalents per share: $0.83
- Cash and cash equivalents makes up 1.8% of Cornerstone's total assets
- Cash and cash equivalents makes up 12.25% of Cornerstone's current market capital
- Accounts receivable: $594.681 million
- Accounts receivable makes up 10.4% of Cornerstone's total assets
- Inventories: $467.916 million
- Inventories makes up 8.2% of Cornerstone's total assets
- Stockholders equity: $927.885 million
- Stockholders equity per share: $7.39
- Cornerstone is trading at 0.92 times its stockholders equity per share which is pretty uncommon as most firms tend to trade at between 2 and 4 times its stockholders equity. The very least one would expect firms to trade at 1 time its stockholders equity as this shows what each stockholder will get should the company sell all its assets, pay all its liabilities and distribute the rest to stockholders.
- Cash generated by operation (for the 9 months): $67.819 million
- Cash generated from operations per share (for the 9 months): $0.54
Cornerstone's management commentary on the results and earnings guidance
Cornerstone Building Brands, Inc. (NYSE: CNR) (the “Company”), the largest manufacturer of exterior building products in North America, today reported financial results for the quarter ended September 28, 2019.
Financial and Operational Highlights for the Third Quarter:
Commenting on the Company’s third quarter performance, Cornerstone Building Brands’ Chairman and Chief Executive Officer, James S. Metcalf said, “During the third quarter, our operational initiatives including procurement, continuous improvement, cost initiatives and merger savings drove significant margin expansion across our windows, siding and commercial businesses, despite lower year-over-year market volumes. With a concentration on pricing discipline and cost management, we were able to successfully deliver a strong quarter at the upper end of our Adjusted EBITDA guidance range.”
“We also generated $97.7 million in operating cash flows for the quarter, which allowed the Company to pay down a net $50.0 million on our ABL facility. By de-levering and strengthening the balance sheet, the improvements actioned and delivered by our cost savings programs are exceeding expectations. Operationally, we remain focused on providing a premier level of quality and service with a broad suite of building products solutions to all our customers,” Mr. Metcalf concluded.
Financial and Operational Highlights for the Third Quarter:
- Net sales of $1,285.0 million
- Gross profit of $309.8 million, or 24.1% of net sales
- Net income of $25.2 million with basic and diluted earnings per share of $0.20
- Adjusted EBITDA of $180.8 million, or 14.1% of net sales
- Net debt leverage reduction from 6.2x to 5.9x in the quarter
Commenting on the Company’s third quarter performance, Cornerstone Building Brands’ Chairman and Chief Executive Officer, James S. Metcalf said, “During the third quarter, our operational initiatives including procurement, continuous improvement, cost initiatives and merger savings drove significant margin expansion across our windows, siding and commercial businesses, despite lower year-over-year market volumes. With a concentration on pricing discipline and cost management, we were able to successfully deliver a strong quarter at the upper end of our Adjusted EBITDA guidance range.”
“We also generated $97.7 million in operating cash flows for the quarter, which allowed the Company to pay down a net $50.0 million on our ABL facility. By de-levering and strengthening the balance sheet, the improvements actioned and delivered by our cost savings programs are exceeding expectations. Operationally, we remain focused on providing a premier level of quality and service with a broad suite of building products solutions to all our customers,” Mr. Metcalf concluded.
Guidance
The Company’s key economic indicators are tracking toward low growth in the residential new construction and repair & remodel markets and a moderate contraction in the commercial construction markets. Based on these market indicators and the synergies and cost initiatives, the Company expects Adjusted EBITDA to be in the range of $135 to $150 million for the fourth quarter of fiscal 2019.
The Company’s key economic indicators are tracking toward low growth in the residential new construction and repair & remodel markets and a moderate contraction in the commercial construction markets. Based on these market indicators and the synergies and cost initiatives, the Company expects Adjusted EBITDA to be in the range of $135 to $150 million for the fourth quarter of fiscal 2019.
Cornerstone (NYSE: CNR) stock price history
The image below, obtained from Google shows the stock price performance of Cornerstone over the last 5 years. And its been a pretty volatile and largely negative period for the group. 5 years ago the stock of Cornerstone was trading at around $19.50 and its currently trading at $6.87. Thats a significant loss of -% suffered by Cornerstone stockholders over the last 5 years.
The stock of Cornerstone is currently trading a lot closer to its 52 week low of $3.37 than it is to its 52 week high of $13.82 which to us is a clear indication that the short term sentiment and momentum of Cornerstone's stock is negative.
The stock of Cornerstone is currently trading a lot closer to its 52 week low of $3.37 than it is to its 52 week high of $13.82 which to us is a clear indication that the short term sentiment and momentum of Cornerstone's stock is negative.
Cornerstone (NYSE:CNR) share price history over the last 5 years
Recent coverage of Cornerstone
The extract below discusses the latest regarding Cornerstone Building Brands as obtained from TheStreet.com
CARY, N.C., Oct. 1, 2019 /PRNewswire/ -- In celebration of National Manufacturing Day 2019, Cornerstone Building Brands (NYSE: CNR) will open four of its facilities as part of an ongoing effort to promote the strength of U.S. manufacturing and increase awareness of the outstanding career opportunities in the field. These events will include tours of the facilities, presentations from company leaders and question-and-answer sessions. The following facilities will be participating in National Manufacturing Day and open to the public: October 4, 2019
CARY, N.C., Oct. 1, 2019 /PRNewswire/ -- In celebration of National Manufacturing Day 2019, Cornerstone Building Brands (NYSE: CNR) will open four of its facilities as part of an ongoing effort to promote the strength of U.S. manufacturing and increase awareness of the outstanding career opportunities in the field. These events will include tours of the facilities, presentations from company leaders and question-and-answer sessions. The following facilities will be participating in National Manufacturing Day and open to the public: October 4, 2019
- Siding facility in Martinsburg, West Virginia from 9:00 a.m. to 3:00 p.m.
- Siding facility in Gaffney, South Carolina from 9:00 a.m. to 3:00 p.m.
- Siding facility in Sidney, Ohio from 10:00 a.m. to 3:00 p.m.
A house using a variety of Cornerstone Building Brands products
Cornerstone (NYSE: CNR) latest stock valuation
So what are Cornerstone Building Brands stock worth based on their latest earnings report published? Based on the group's earnings report and the fact that unlike the previous quarter of 2019 they generated positive cash flows and reported a profit per stock our valuation model provides a target price of $8.11 a stock. We therefore believe the stock of Cornerstone is undervalued
We usually recommend that long term investors or value investors look to enter a stock at least 10% below our target price which in this case is $8.11. We therefore believe that a good entry point into Cornerstone stock is at $7.30 or below. Since Cornerstone is trading at well below our suggested entry point into the stock we rate Cornerstone as a buy
We usually recommend that long term investors or value investors look to enter a stock at least 10% below our target price which in this case is $8.11. We therefore believe that a good entry point into Cornerstone stock is at $7.30 or below. Since Cornerstone is trading at well below our suggested entry point into the stock we rate Cornerstone as a buy
Next earnings release of Cornerstone Building Brands
It is expected that Cornerstone Building Brands will release their 4th quarter and full fiscal 2019 earnings report in early February 2020