EARNINGS
Gibraltar Steel’s profits soar
Gibraltar Industries’ battered stock continued its comeback Friday, jumping by 24 percent after the Hamburg-based steel processing and building products manufacturer’s profits soared by 56 percent.
The earnings easily topped analyst forecasts, and the company further cheered investors by hiking its earnings forecast for the entire year. The company’s cost-cutting efforts are paying off, despite continued weakness in Gibraltar’s important housing and automotive markets.
“These were strong results, especially in light of weakness in two of our major markets and a slowing economy,” said Brian J. Lipke, Gibraltar’s chairman and chief executive officer. “This is still a tough operating environment.”
Gibraltar executives gave much of the credit for the improved profits to the company’s cost-cutting efforts that began last year. The changes have involved the consolidation of 18 facilities since the beginning of last year, including four during the second quarter.
Those reduced costs, combined with aggressive debt reduction efforts that have paid off $115 million in borrowings over the last nine months, helped restore Gibraltar’s profitability to levels it had not achieved since the third quarter of 2006, when the housing market began to collapse.
Gibraltar’s profits from continuing operations jumped by 56 percent to $20.3 million, or 67 cents per share, far better than the 38 cents per share that analysts surveyed by Thomson Financial/First Call were expecting and well above the $13 million, or 43 cents per share, that the company earned a year ago.
Sales from continuing operations rose 6 percent to $379 million from $356 million, which was better than the $365 million in revenues that analysts were expecting. Almost all of the increase in revenues was due to acquisitions the company has made over the last year.
The strong second quarter prompted Gibraltar executives to hike their earnings forecast for the entire year. Gibraltar now expects to earn $1.50 to $1.65 per share from continuing operations this year, far above the $1.05 to $1.25 per share it previously had predicted and better than the $1.03 per share the company earned last year.
That brighter outlook helped Gibraltar’s stock jump by $3.89 to $18.90, wiping out its decline earlier this year and leaving the shares up 21 percent so far in 2008.
While Gibraltar executives said they don’t see the company’s housing and auto markets turning around this year, they still were comfortable raising their earnings guidance because the cost-cutting efforts began to generate benefits faster than expected.
While Gibraltar traditionally has relied on acquisitions to fuel its revenue growth, Lipke said the company has been putting most of its focus lately on the efforts to lower costs and streamline operations.
“We’ve kind of put acquisitions on a side burner,” he said during a conference call, although it’s possible the company could make some bolt-on deals that enhance Gibraltar’s product line later this year.
