Summary : Dallas-based Builders FirstSource Inc. saw its earnings double year over year in the second quarter but is preparing for a potential downturn as homebuilders begin to pull back on constructing new homes and buyer demand sinks.
“Our industry is clearly experiencing pockets of deceleration; we’ve all seen mortgage rates rising, single-family starts forecasts coming down in the back half of this year and cancelation rates increasing,” said Builders FirstSource CEO Dave Flitman in an earnings call Monday morning. Flitman told investors to expect the company to lean in on opportunities to buy other companies during a downturn. In its earnings release, the company said it purchased HomCo, a lumber and hardware supplier in Flagstaff, Ariz.
Last year, Builders FirstSource completed $1.2 billion in acquisitions after its nearly $2.5 billion acquisition of North Carolina-based rival firm BMC Stock Holdings in 2021.
Flitman said any demand shift or decline would be “short-lived” especially compared with 2007, as there is much stronger demand for homes, especially from millennials.
Dallas-based Builders FirstSource Inc. saw its earnings double year over year in the second quarter but is preparing for a potential downturn as homebuilders begin to pull back on constructing new homes and buyer demand sinks.The fast-growing building materials giant reported earnings of $1 billion — up 98.5% — and a 24% increase in sales to $6.9 billion. The financial growth was driven by double-digit organic growth, higher materials prices, acquisitions and demand in the housing market, the company said.Still, with the shift in the housing market, the company is projecting slightly less sales growth than it expected going into this year.“Our industry is clearly experiencing pockets of deceleration; we’ve all seen mortgage rates rising, single-family starts forecasts coming down in the back half of this year and cancelation rates increasing,” said Builders FirstSource CEO Dave Flitman in an earnings call Monday morning. “We are not deterred.”The company forecasts a percentage decrease in housing starts for this year in the mid-single digits across its markets. Flitman said if starts fall more than 20%, the company could take actions such as reducing its spending, freezing hiring and cutting jobs.“Although there were certainly be some challenges over the near term, we remain very optimistic on the prospects for our industry over the long term,” he said. “I am highly confident in our ability to outperform the market in any scenario.”Flitman told investors to expect the company to lean in on opportunities to buy other companies during a downturn. The company has spent $230 million of the $500 million it plans to invest on acquisitions in 2022, including the $180.5 million acquisition of two building component manufacturers earlier this year. In its earnings release, the company said it purchased HomCo, a lumber and hardware supplier in Flagstaff, Ariz.Last year, Builders FirstSource completed $1.2 billion in acquisitions after its nearly $2.5 billion acquisition of North Carolina-based rival firm BMC Stock Holdings in 2021.Flitman said any demand shift or decline would be “short-lived” especially compared with 2007, as there is much stronger demand for homes, especially from millennials. He also said the housing market has been underbuilt over the last decade.Peter Jackson, chief financial officer, said the company is seeing signs of supply chain constraints loosening and that lead times are starting to return to normal.During the quarter, the company bought back almost $1 billion in shares, part of a $2 billion repurchase authorization approved by its board in May.Builders FirstSource supplies homebuilders with raw materials and prefabricated components, such as lumber, windows, doors, roof trusses, wall panels and stairs. It has about 30,000 employees and 560 locations across the country.
