PGT, Inc.’s (PGTI) adjusted earnings per share for fourth-quarter 2013 marked an impressive 100% increase to 12 cents from 6 cents in the year-ago quarter. The results were ahead of the Zacks Consensus Estimate of 10 cents.
Shares reached a new 52-week high of $12.38, exceeding the previous high of $11.58 on Feb 20. The stock price gained around 5% and closed at $12.06.
Including the release of valuation allowance on deferred tax assets, the company reported earnings from continuing operations at 11 cents per share, as compared with 6 cents in the year-ago quarter.
Operational Update
Net sales in the fourth quarter improved 37% year over year to $62 million, surpassing the Zacks Consensus Estimate of $57 million. This marks the fifth straight quarter of substantial top-line rise.
New construction sales growth was 56% in the quarter. Repaid and remodel sales were up 28.7% year over year driven by improved market conditions in Florida including rising home prices and reduced unemployment.
Cost of sales went up 41.8% year over year to $41 million. Gross profit rose 28.8% to $20.6 million from the year-ago quarter, driven by strong revenue growth. However, gross margin contracted 220 basis points (bps) year over year to 33% due to increase in labor and material costs.
Selling, general and administrative expenses increased 15.8% to $13.8 million from $11.9 million in the prior-year quarter. The company posted adjusted net income of $5.8 million as against $3.2 million in the year-ago quarter.
Financial Performance
PGT ended 2013 with cash and cash equivalents of $30 million, up from $18.7 million as of 2012-end. Long-term debt of the company increased to $72 million as of Dec 31, 2013 from $37.5 million as of Dec 31, 2012. Debt-to-capitalization ratio was 61% as of Dec 31, 2013 as against 33.5% in the year-ago comparable period.
Fiscal 2013 Performance
For full-year 2013, PGT reported adjusted earnings per share of 44 cents, marking an improvement of 175% from 16 cents in 2012. The results beat the Zacks Consensus Estimate by a penny. Including one-time items, earnings per share (EPS) was 51 cents, compared with 16 cents in the prior year.
Revenues for the year 2013 increased 37% year over year to $293 million, driven by organic sales growth and improved product quality and reliability. Revenues surpassed the Zacks Consensus Estimate of $231 million.
Outlook
PGT guided sales for the first quarter of 2014 in the range of $62–$65 million. The company expects earnings before interest, taxes, depreciation and amortization (EBITDA) margins to remain in the mid teens. The company, at present, is working on a new vinyl window platform for both impact and non-impact products and will benefit from its vinyl products offering.
Our View
PGT remains optimistic about the opportunities to leverage sales and advertising campaigns, which will drive brand awareness. In the fourth quarter, PGT witnessed improvement in both the labor and scrap categories, depicting 180 bps increase from the third quarter of 2013. Going into 2014, PGT continues to recruit and train employees to improve capacity and operational efficiency.
The company is on track to complete the new glass plant by the end of third-quarter 2014, which will help to increase in-house glass capacities and improve material cost. It is estimated that this initiative will improve gross margins by approximately 2% in 2014.
North Venice, Florida-based PGT is the leading U.S. manufacturer and supplier of residential impact-resistant windows and doors. PGT's product line includes a variety of aluminum and vinyl windows and doors, which are ideal for new construction and replacement projects serving the residential, commercial, high-rise and institutional markets.
PGT currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the building and construction industry include CaesarStone Sdot-Yam Ltd. (CSTE), USG Corporation (USG) and Wolseley plc (WOSYY). While CaesarStone has a Zacks Rank #1 (Strong Buy), USG Corporation and Wolseley carry a Zacks Rank #2 (Buy).
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