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Core & Main, Inc. (NYSE: CNM), a prominent distributor in infrastructure solutions, reported a robust performance for the fourth quarter of fiscal 2024. The company’s net sales surged by 17.9% to reach $1.698 billion, compared to the previous year’s $1.440 billion.
This growth was largely driven by acquisitions, increased volumes, and the additional selling week in the current fiscal year, although slightly offset by lower selling prices. The increase in sales was notable across various segments, including pipes, valves, fittings, and storm drainage, while fire protection products saw a decline due to lower prices and market volumes. Gross profit for the quarter also saw a significant rise of 17.4%, reaching $451 million, up from $384 million in the previous year. However, the gross profit margin experienced a slight dip to 26.6% from 26.7%, primarily due to the lower benefits from strategic inventory investments made during the inflationary period of the prior year.
Despite this, the company managed to implement effective gross margin initiatives and accretive acquisitions, which contributed positively to the margin performance. Operating income for the quarter increased by 6.9% to $124 million, bolstered by higher gross profit, although partially offset by elevated selling, general, and administrative (SG&A) expenses. SG&A expenses rose by 21.3% to $279 million, attributed to personnel expenses related to acquisitions, inflation, and other growth investments. The net income, however, declined by 11.8% to $67 million due to increased interest and income tax expenses.
Core & Main Reports Q4 FY’25 Results
When comparing Core & Main’s fourth-quarter results with market expectations, there are some notable discrepancies. The company reported diluted earnings per share (EPS) of $0.33, which fell short of the anticipated $0.3621. This shortfall in earnings is attributed to the decline in net income and higher share counts following share repurchase transactions. Despite the lower-than-expected EPS, the company maintained strong sales growth and adjusted EBITDA performance.
Revenue for the quarter reached $1.698 billion, slightly surpassing the expected $1.68 billion. This indicates that while Core & Main successfully expanded its sales through strategic acquisitions and increased product adoption, the profitability measures were affected by the higher operational costs and interest expenses. The adjusted EBITDA for the quarter increased by 11.9% to $179 million, reflecting the company’s ability to manage its operational efficiencies despite the challenges faced.
The fiscal year 2024 results also highlighted an 11% increase in net sales to $7.441 billion, compared to $6.702 billion in fiscal 2023. However, the net income for the fiscal year decreased by 18.3% to $434 million, with diluted EPS dropping slightly to $2.13, below expectations. The company’s ability to manage acquisitions and integrate them effectively contributed to the sales growth, but the financial expectations were tempered by increased operating expenses and interest costs.
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Core & Main Projects Net Sales Between $7.6B to $7.8B
Looking ahead, Core & Main has provided guidance for fiscal 2025, projecting net sales between $7.6 billion and $7.8 billion, which represents a growth of 2% to 5%. This growth is expected despite the transition from a 53-week to a 52-week fiscal year. The company anticipates adjusted EBITDA to range from $950 million to $1 billion, with an adjusted EBITDA margin between 12.5% and 12.8%. Operating cash flow is projected to be between $570 million and $650 million.
Core & Main’s leadership expressed confidence in the company’s outlook, citing a strong value proposition and strategic initiatives aimed at expanding product offerings and geographic reach. The company plans to focus on private label products, sourcing optimization, and pricing strategies to drive gross margin expansion. Despite the challenges in the broader economic environment, Core & Main remains committed to delivering above-market sales growth and enhancing shareholder value.
The company’s strategic focus on municipal repair and replacement activity, along with its investments in growth and acquisitions, positions it well for continued success in fiscal 2025. The leadership transition, with Mark Witkowski stepping in as CEO, is expected to maintain the momentum and drive the company’s strategic objectives forward.
Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
