Summit Materials, Inc. (SUM) has recently released its fourth-quarter 2023 results, presenting a scenario where earnings and revenues have surpassed the Zacks Consensus Estimate. The company’s top line experienced growth, albeit with a minor downturn in the bottom line when compared to the previous year.
The uptick in the company’s top line can be primarily attributed to increased average sales prices across all lines of business. The focus on Argos integration, intended to bolster its materials-led business, is a noteworthy brownie point. However, escalated general and administrative expenses, and transaction and integration costs significantly impacted the company’s bottom line during the quarter.
Nonetheless, with a considerably improved footprint and heightened scale, the company is now evidently well-equipped to deliver sturdy results throughout 2024.
Following these impressive results, shares of SUM witnessed a notable surge of 6.6% after the trading hours on February 14, 2023.
A Closer Look at the Figures
Summit reported adjusted earnings of 31 cents per share, outperforming the Zacks Consensus Estimate of 27 cents by 14.8%. This figure, however, shows a decrease from the 32 cents per share reported during the year-ago quarter.
Summit Materials, Inc. price-consensus-eps-surprise-chart | Summit Materials, Inc. Quote
Net revenues of $613.1 million surpassed the consensus mark of $566 million by 8.3%, signifying a significant 19.8% year-over-year growth.
Performance by Business Segments
Total Materials and Products
Aggregates: This segment observed a 16.2% year-over-year increase in quarterly net revenues to $157.6 million. The adjusted cash gross profit margin expanded by 90 basis points (bps) to 48.7%.
Cement: Net revenues for this business declined to $88 million from $90.7 million in the year-ago quarter. Despite this decline, the adjusted cash gross profit margin expanded by 100 bps to 48.1%.
Meanwhile, Products experienced a 27.5% surge in quarterly net revenues to $282.4 million from $221.5 million reported in the year-ago period. The adjusted cash gross profit margin however contracted to 16.5%.
Services
Net revenues for this sector increased to $85.1 million from $63.9 million reported a year ago. The adjusted cash gross profit margin in the quarter also registered a growth of 130 bps, standing at 21.2% in comparison to 19.9% during the year-ago period.
Segmental Highlights
West Segment: This sector experienced an extensive 30.6% year-over-year increase in fourth-quarter net revenues to $377.4 million. The operating income also surged by 25.1% to reach $47.8 million and the adjusted EBITDA saw a 17.2% growth, reaching $76.1 million.
East Segment: The net revenues for this segment were $140.4 million, presenting a year-over-year increase of 12.5%. Meanwhile, the segment’s operating income and adjusted EBITDA surged by 17.5% and 12.6%, reaching $17.9 million and $34.1 million respectively, also on a year-over-year basis.
Cement Segment: This sector reported a decline in quarterly net revenues to $95.3 million from the $97.9 million reported in the year-ago quarter. Moreover, both the operating income and adjusted EBITDA also displayed a decrease of 5.8% and 1.9% respectively, year-over-year.
Highlights from 2023
In 2023, the net revenues amounted to $2.44 billion, indicating a 9.9% increase from the prior year. Moreover, the adjusted earnings per share experienced a substantial rise of 24.4%, reaching $1.58 from $1.27 reported in 2022. Adjusted EBITDA for the full year also climbed 17.6% to $578 million from $491.5 million reported a year ago.
Liquidity and Future Projections
As of December 30, 2023, Summit possessed cash and cash equivalents of $374.2 million, in contrast to $520.5 million at the end of 2022. Meanwhile, the long-term debt stood at $2.28 billion, up from $1.49 billion as of 2022-end. Notably, the net cash provided by operating activities for 2023 surged to $438.9 million, in contrast to $284.1 million reported in the year-ago period.
For the full year of 2024, Summit has set its sights on an adjusted EBITDA in the range of $950 million-$1.01 billion, with anticipated capital expenditures hovering between $430 million to $470 million.
Market Insights & Outlook
SUM currently holds a Zacks Rank #1 (Strong Buy), bolstering investor confidence in the stock. The construction industry as a whole is demonstrating signs of growth and resilience, as disclosed in the recent financial reports of key industry players such as Martin Marietta Materials, Inc. (MLM), Watsco, Inc. (WSO), and Masco Corporation (MAS). These organizations, albeit with unique challenges, have been outlining their strategies and forecasts for the upcoming quarters, providing investors with a panoramic view of the industry’s dynamics.
