Shares of Simpson Manufacturing Co., Inc. (SSD) gained around 1.2% and closed at $33.65, a day after the company reported better-than-expected fourth-quarter 2014 results. Earnings improved 31% year over year to 21 cents per share from 16 cents in the year-ago quarter and also beat the Zacks Consensus Estimate by a penny.
Operational Update
Total revenue rose 4% to $166.6 million from $160 million in the year-ago quarter, beating the Zacks Consensus Estimate of $170 million. The year-over-year rise was primarily attributable to increased sales in North America aided by improved economic activities.
Cost of sales went up 3.9% year over year to $93.8 million. Gross profit was $72.8 million, up 4.4% from $69.7 million in the year-ago quarter. Gross margin increased marginally by 10 basis points (bps) to 45.7% from the prior-year quarter.
Research and development and engineering expenses increased 3.2% year over year to $9.5 million. Selling expenses increased to $22.4 million from $21.4 million in the prior-year quarter. General and administrative expenses went up 1.4% year over year to $25.5 million. Income from operations improved 28.7% year over year to $15 million.
Segment Performance
Revenues in the North American segment rose 7% to $137 million from $128 million in the year-ago quarter, primarily led by increased sales volume. Segment profit increased 9% year over year to $12.3 million.
Total revenues for the European segment declined 7% year over year to $25.9 million, mainly on the back of negative impact from foreign currency translations and slightly lower selling prices, partly offset by increased unit sales volumes. Sales were also impacted by weakening economic conditions in the region. The segment reported a loss of $1.3 million in the quarter, wider than a loss of $0.5 million reported in the year-ago quarter.
Asia/Pacific segment’s total revenues decreased 17% to $3.5 million from $4.2 million in the year-ago quarter. The segment reported a gain of $0.2 million, reversing from the loss of $0.3 million recorded in the year-ago quarter.
Financial Position
Simpson Manufacturing reported cash and cash equivalents of $260.3 million at the end of 2014, compared with $251.2 million at 2013-end.
On Feb 2, 2015 the company authorized the repurchase of up to $50 million worth of shares. The authorization will remain in effect through the end of 2015.
2014 Performance
Simpson Manufacturing posted earnings of $1.29 per share for 2014, which surged 22.9% year over year. Earnings came in line with the Zacks Consensus Estimate. Revenues for the full year increased 6.6% year over year to $752 million from $705 million in 2013. Revenues, however, lagged the Zacks Consensus Estimate of $756 million.
Our Take
Simpson Manufacturing will benefit from its strategic initiatives, which include a wider offering of concrete construction products, specialty chemicals and wood construction products, particularly truss plate and software offerings. The company’s continued focus on increasing its product offering and strengthening its position in different geographic regions also bode well.
Pleasanton, CA-based Simpson Manufacturing is a leading manufacturer of wood construction products, which include connectors, truss plates, fastening systems, fasteners and shear walls. The company, through its subsidiary, Simpson Strong-Tie Company Inc., designs and engineers concrete construction products, comprising adhesives, specialty chemicals, mechanical anchors and powder actuated tools.
At present, Simpson Manufacturing carries a Zacks Rank #4 (Sell). However, some better-ranked stocks in the sector include Armstrong World Industries, Inc. (AWI), Headwaters Incorporated (HW) and Ply Gem Holdings, Inc (PGEM). All these stocks carry a Zacks Rank #2 (Buy).
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