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Category: Simpson Manufacturing (SSD)
Date: 27 October 2020 Stock Price of Simpson Manufacturing: $94.03 We take a look at the 3rd quarter of their 2020 fiscal year earnings report of Simpson Manufacturing, a company that through its subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood construction products. The group reported revenues of $364.3 million and net income of $67.057 million for the 3rd quarter of their 2020 fiscal year.
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About Simpson Manufacturing
Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood construction products, including connectors, truss plates, fastening systems, fasteners and shearwalls, and concrete construction products, including adhesives, specialty chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials. The Company's common stock trades on the New York Stock Exchange under the symbol "SSD."
Overview of Simpson Manufacturing's 3rd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Net sales: $364.3 million (up from $309.9 million for the same quarter in the previous year)
- Net sales increased by 17.6% over the last 12 months
- Cost of sales: $191.061 million (up from $172.278 million for the same quarter in the previous year)
- Cost of sales increased by 10.9% over the last 12 months
- So some margin gain for Simpson Manufacturing wit their net sales increasing at faster rate than their cost of sales
- Net income: $67.057 million (up from $43.686 million for the same quarter in the previous year)
- Diluted earnings per share: $1.54 (up from $0.97 for the same quarter in the previous year)
- PE ratio of Simpson Manufacturing: 19.6
- Dividend declared: $0.23
- Dividend yield of Simpson Manufacturing: 0.97%
- Diluted number of shares in issue: 43.683 million (down from 44.814 million for the same quarter of the previous year)
- Cash and equivalents: $311.465 million
- Cash and equivalents per share: $7.13
- Cash and equivalents makes up 7.6% of Simpson Manufacturing's current market capital
- Cash and equivalents makes up 24.4% of Simpson Manufacturing's total assets
- Trade and other receivables: $226.447 million
- Trade and receivables makes up 17.7% of Simpson Manufacturing's total assets
- Inventories of Simpson Manufacturing: $260.054 million
- Inventories makes up 20.4% of Simpson Manufacturing's total assets
- Stockholders equity in Simpson Manufacturing: $960.800 million
- Stockholders equity per share in Simpson Manufacturing: $21.9
- Simpson Manufacturing is trading at 4.29 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- For some perspective the average price to book value of firms in the S&P 500 is 3.7
Simpson Manufacturing's management commentary on their 3rd quarter 2020 earnings
Pleasanton, CA – October 26, 2020.. Simpson Manufacturing Co., Inc. (the “Company”) (NYSE: SSD), an industry leader in engineered structural connectors and building solutions, today announced its financial results for the third quarter of 2020.
“We delivered strong third quarter results with our sales increasing 17.5% year-over-year and 11.7% quarter-over-quarter to $364.3 million on significantly higher volume,” commented Karen Colonias, the Company's President and Chief Executive Officer. “Our sales volume improved primarily due to ongoing momentum in our home center and co-op customers as we have continued to benefit from the shift in consumer behavior toward home renovations as a result of the COVID-19 pandemic. Sales volumes were supported by the return of Lowe’s as a home center customer in the second quarter of 2020. By the end of October, we expect nearly all 1,737 Lowe’s stores will be set with our industry-leading connectors, mechanical anchor and fastener product solutions. Our sales were further supported by improving U.S. housing starts and the recovery in Europe following government shutdowns in the United Kingdom and France due to COVID-19 in late March. In addition, we achieved a considerable improvement in our gross margin to 47.6% in the third quarter of 2020 from 44.4% in the third quarter of 2019. The strength in our gross margin, combined with our effective expense management, helped drive a 49.8% year-over-year increase in our income from operations to $91.3 million and strong earnings of $1.54 per diluted share.”
“We delivered strong third quarter results with our sales increasing 17.5% year-over-year and 11.7% quarter-over-quarter to $364.3 million on significantly higher volume,” commented Karen Colonias, the Company's President and Chief Executive Officer. “Our sales volume improved primarily due to ongoing momentum in our home center and co-op customers as we have continued to benefit from the shift in consumer behavior toward home renovations as a result of the COVID-19 pandemic. Sales volumes were supported by the return of Lowe’s as a home center customer in the second quarter of 2020. By the end of October, we expect nearly all 1,737 Lowe’s stores will be set with our industry-leading connectors, mechanical anchor and fastener product solutions. Our sales were further supported by improving U.S. housing starts and the recovery in Europe following government shutdowns in the United Kingdom and France due to COVID-19 in late March. In addition, we achieved a considerable improvement in our gross margin to 47.6% in the third quarter of 2020 from 44.4% in the third quarter of 2019. The strength in our gross margin, combined with our effective expense management, helped drive a 49.8% year-over-year increase in our income from operations to $91.3 million and strong earnings of $1.54 per diluted share.”
Mrs. Colonias continued, “While our focus over the past seven months has been on cash preservation to ensure our working capital needs could be met in the near-term due to uncertainty related to COVID-19, we have been grateful to be able to operate as a supplier to other essential businesses with minimal disruptions. As such, we are continuing to support our growth strategy in identifying M&A opportunities that would complement our existing product offering and manufacturing footprint or strengthen our software capabilities. In-line with this initiative, we recently made two strategic asset purchases including the acquisition of a small connector manufacturer in the United Kingdom that we expect to improve our market share in Europe and a small software application that we believe will strengthen our value proposition for builders.” Mrs. Colonias concluded, “At Simpson, we value our employees’ health, safety and wellbeing as our top priority and strive for continuous improvement to ensure our Company remains a safe and rewarding place to work. Our diligence, including strict adherence to protocols to help minimize the spread of COVID-19, has enabled us to continue operating our business, while executing against our strategic, operational and financial initiatives in order to maximize shareholder value.”
Business Outlook
On July 27, 2020, the Company reinstated its 2020 full-year outlook originally provided on February 3, 2020. The Company is updating its full year outlook, primarily reflecting three quarters of actual results, as well as improved visibility on the progression of pandemic-related restrictions and the impact of those restrictions on the Company’s operations.
Based on business trends and conditions as of today, October 26, the Company's outlook for the full fiscal year ending December 31, 2020 is as follows:
• Net sales are estimated to increase in the range of 9.0% to 10.0% compared to the full year ended December 31, 2019.
• Gross margin is estimated to be in the range of 45.0% to 46.0%.
• Operating expenses, as a percentage of net sales, are estimated to be in the range of 25.0% to 26.5%.
• The effective tax rate is estimated to be in the range of 24.5% to 26.0%, including both federal and state income tax rates.
While the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain, the Company is continuing to monitor the impact of the outbreak on its operations and financial condition, which was not significantly adversely impacted in the second quarter or third quarter of 2020. Please note that ongoing uncertainties surrounding the impact of COVID-19 on the Company’s business, which may include the economic impact on its operations, raw material costs, consumers, suppliers, vendors, and other factors outside of its control, may have a material adverse impact on the Company’s financial outlook.
Business Outlook
On July 27, 2020, the Company reinstated its 2020 full-year outlook originally provided on February 3, 2020. The Company is updating its full year outlook, primarily reflecting three quarters of actual results, as well as improved visibility on the progression of pandemic-related restrictions and the impact of those restrictions on the Company’s operations.
Based on business trends and conditions as of today, October 26, the Company's outlook for the full fiscal year ending December 31, 2020 is as follows:
• Net sales are estimated to increase in the range of 9.0% to 10.0% compared to the full year ended December 31, 2019.
• Gross margin is estimated to be in the range of 45.0% to 46.0%.
• Operating expenses, as a percentage of net sales, are estimated to be in the range of 25.0% to 26.5%.
• The effective tax rate is estimated to be in the range of 24.5% to 26.0%, including both federal and state income tax rates.
While the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain, the Company is continuing to monitor the impact of the outbreak on its operations and financial condition, which was not significantly adversely impacted in the second quarter or third quarter of 2020. Please note that ongoing uncertainties surrounding the impact of COVID-19 on the Company’s business, which may include the economic impact on its operations, raw material costs, consumers, suppliers, vendors, and other factors outside of its control, may have a material adverse impact on the Company’s financial outlook.
Simpson Manufacturing (NYSE: SSD) stock price history over the last 5 years
The image below, obtained from Google, shows the stock price history of Simpson Manufacturing over the last 5 years. And its been a very good time for Simpson Manufacturing stockholders The group's stock traded at around $38.00 a stock 5 years ago and is currently trading at $94.03 a stock. That's a significant return of 147.6% provided to Simpson Manufacturing stockholders over the last 5 years.
Simpson Manufacturing stock is trading at very close to its 52 week high of $104.34 and far away from its 52 week low of $47.02 which to us is a clear indication that the short term sentiment and momentum of Simpson Manufacturing is very positive
Simpson Manufacturing stock is trading at very close to its 52 week high of $104.34 and far away from its 52 week low of $47.02 which to us is a clear indication that the short term sentiment and momentum of Simpson Manufacturing is very positive
Simpson Manufacturing (SSD) stock vs Illinois Tool Works (ITW) stock over the last 5 years
The image below shows the stock price history of Simpson Manufacturing (SSD) and Illinois Tool Works (ITW) over the last years. Both are large manufacturing firms and their stock price trends are pretty similar. The summary below shows the returns provided by the two manufacturing firms over the last 5 years
- Simpson Manufacturing (SSD): 152.9%
- Illinois Tool Works (ITW): 114.2%
Recent coverage of Simpson Manufacturing
The extract below discusses the latest regarding Delta Apparel as obtained from Nasdaq.com
Simpson Manufacturing (SSD) came out with quarterly earnings of $1.54 per share, beating the Zacks Consensus Estimate of $1.06 per share. This compares to earnings of $0.97 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 45.28%. A quarter ago, it was expected that this building materials company would post earnings of $0.63 per share when it actually produced earnings of $1.22, delivering a surprise of 93.65%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Read the full article here
Simpson Manufacturing (SSD) came out with quarterly earnings of $1.54 per share, beating the Zacks Consensus Estimate of $1.06 per share. This compares to earnings of $0.97 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 45.28%. A quarter ago, it was expected that this building materials company would post earnings of $0.63 per share when it actually produced earnings of $1.22, delivering a surprise of 93.65%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
Read the full article here
Simpson Manufacturing (NYSE: SSD) latest stock valuation
So what do we value Simpson Manufacturing stock at based on their latest earnings release? Based on Simpson Manufacturing latest earnings report our valuation model provides a target price (full value price) for Simpson Manufacturing stock at $81.20 a stock . We therefore believe the stock of Simpson Manufacturing is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $62.80. A good entry point into Simpson Manufacturing would therefore be at $73.10 or below.
Since the stock of Simpson Manufacturing is trading at well above our suggested entry point we rate the stock of Simpson Manufacturing as a sell
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price which in this case is $62.80. A good entry point into Simpson Manufacturing would therefore be at $73.10 or below.
Since the stock of Simpson Manufacturing is trading at well above our suggested entry point we rate the stock of Simpson Manufacturing as a sell
Next earnings release of Simpson Manufacturing
It is expected that Simpson Manufacturing will release their 4th quarter 2020 earnings report in late January 2021
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