Builders FirstSource (NYSE:BLDR) Beats Q3 Sales Expectations

Building materials company Builders FirstSource (NYSE:BLDR) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales fell by 6.9% year on year to $3.94 billion. The company expects the full year’s revenue to be around $15.25 billion, close to analysts’ estimates. Its non-GAAP profit of $1.88 per share was 8.8% above analysts’ consensus estimates.

Is now the time to buy Builders FirstSource? Find out by accessing our full research report, it’s free for active Edge members.

Company Overview

Headquartered in Irving, TX, Builders FirstSource (NYSE:BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Builders FirstSource grew its sales at a solid 10.1% compounded annual growth rate. Its growth beat 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. Builders FirstSource’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.9% over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Manufactured products and Windows, doors & millwork , which are 22% and 25.1% of revenue. Over the last two years, Builders FirstSource’s Manufactured products revenue (floors, wall panels, and engineered wood) averaged 12.9% year-on-year declines while its Windows, doors & millwork revenue (self explanatory) averaged 4.8% declines.

This quarter, Builders FirstSource’s revenue fell by 6.9% year on year to $3.94 billion but beat Wall Street’s estimates by 2.6%.

Looking ahead, sell-side analysts expect revenue to decline by 2.4% over the next 12 months. While this projection is better than its two-year trend, it’s tough to feel optimistic about a company facing demand difficulties.

Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. Click here to access a free report on our 3 favorite stocks to play this generational megatrend.

Operating Margin

Builders FirstSource has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12%.

Analyzing the trend in its profitability, Builders FirstSource’s operating margin decreased by 4.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, Builders FirstSource generated an operating margin profit margin of 5.8%, down 4.3 percentage points year on year. Since Builders FirstSource’s operating margin decreased more than its gross margin, we can assume it was 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.

Builders FirstSource’s EPS grew at an astounding 29.6% compounded annual growth rate over the last five years, higher than its 10.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Builders FirstSource’s earnings to better understand the drivers of its performance. A five-year view shows that Builders FirstSource has repurchased its stock, shrinking its share count by 6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Builders FirstSource, its two-year annual EPS declines of 24.8% mark a reversal from its (seemingly) healthy five-year trend. We hope Builders FirstSource can return to earnings growth in the future.

In Q3, Builders FirstSource reported adjusted EPS of $1.88, down from $3.07 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 8.8%. Over the next 12 months, Wall Street expects Builders FirstSource’s full-year EPS of $8.08 to shrink by 16.5%.

Key Takeaways from Builders FirstSource’s Q3 Results

We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its and its full-year revenue guidance was in line with Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 4.1% to $120 immediately after reporting.

Builders FirstSource put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.