Building products company Boise Cascade Company (NYSE:BCC) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 4.7% year on year to $1.57 billion. Its GAAP profit of $1.78 per share was 1% below analysts’ consensus estimates.
Is now the time to buy Boise Cascade? Find out by accessing our full research report, it’s free.
Boise Cascade (BCC) Q4 CY2024 Highlights:
- Revenue: $1.57 billion vs analyst estimates of $1.58 billion (4.7% year-on-year decline, 0.7% miss)
- EPS (GAAP): $1.78 vs analyst expectations of $1.80 (1% miss)
- Adjusted EBITDA: $128.7 million vs analyst estimates of $125.5 million (8.2% margin, 2.5% beat)
- Operating Margin: 5.9%, down from 7.4% in the same quarter last year
- Free Cash Flow Margin: 0%, down from 3% in the same quarter last year
- Market Capitalization: $4.54 billion
Company Overview
Formed through the merger of two lumber companies, Boise Cascade Company (NYSE:BCC) manufactures and distributes wood products and other building materials.
Building Material Distributors
Supply chain and inventory management are themes that grew in focus after COVID wreaked havoc on the global movement of raw materials and components. Building materials distributors that boast reliable selection and quickly deliver products to customers can benefit from this theme. While e-commerce hasn’t disrupted industrial distribution as much as consumer retail, it is forcing investment in digital capabilities to communicate with and serve customers everywhere. Additionally, building materials distributors are at the whim of economic cycles that impact the capital spending and construction projects that can juice demand.
Sales Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Boise Cascade’s sales grew at a decent 7.7% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Boise Cascade’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 10.5% over the last two years. 
Boise Cascade also breaks out the revenue for its most important segments, Building Material Distribution and Wood products, which are 91.8% and 26.8% of revenue. Over the last two years, Boise Cascade’s Building Material Distribution revenue (plywood, siding, insulation) averaged 8.6% year-on-year declines while its Wood products revenue (lumber and beams) averaged 6.2% declines.
This quarter, Boise Cascade missed Wall Street’s estimates and reported a rather uninspiring 4.7% year-on-year revenue decline, generating $1.57 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 5.9% over the next 12 months. Although this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
Operating Margin
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Boise Cascade has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.1%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Boise Cascade’s operating margin rose by 1.2 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Boise Cascade generated an operating profit margin of 5.9%, down 1.5 percentage points year on year. Since Boise Cascade’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Boise Cascade’s EPS grew at an astounding 35.9% compounded annual growth rate over the last five years, higher than its 7.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Boise Cascade’s earnings to better understand the drivers of its performance. As we mentioned earlier, Boise Cascade’s operating margin declined this quarter but expanded by 1.2 percentage points over the last five years. Its share count also shrank by 1.7%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Boise Cascade, its two-year annual EPS declines of 33.4% mark a reversal from its (seemingly) healthy five-year trend. We hope Boise Cascade can return to earnings growth in the future.
In Q4, Boise Cascade reported EPS at $1.78, down from $2.44 in the same quarter last year. This print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Boise Cascade’s full-year EPS of $9.55 to grow 5.7%.
Key Takeaways from Boise Cascade’s Q4 Results
It was encouraging to see Boise Cascade beat analysts’ EBITDA expectations this quarter. On the other hand, its revenue slightly missed and its EPS fell slightly short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock remained flat at $116 immediately following the results.
Big picture, is Boise Cascade a buy here and now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
