Core & Main's Q1 Earnings: A Solid Foundation, But Are We Building Up or Digging Down?

Ticker: CNM | Date: June 6, 2023

Breaking Down the Numbers

Core & Main Inc. (NYSE: CNM) has just released its fiscal 2023 first-quarter results, revealing a nuanced picture of its financial health. The company reported net sales of $1.574 billion, reflecting a decrease of 1.5% from the previous year. However, it's worth noting that this figure still marks an impressive 49.2% increase compared to the same quarter in fiscal 2021. Talk about a comeback!

While the revenue forecast has dimmed slightly, the gross profit margin saw an increase of 160 basis points to 27.9%. This is where the earnings surprise shines through, as the increased margin suggests that Core & Main is effectively managing its costs amidst fluctuating sales volume.

Income and Cash Flow: The Good, the Bad, and the Adjusted

Net income for the quarter settled at $133 million, down 2.9% year-over-year. Coupled with an adjusted EBITDA of $220 million (up 0.5%) and an adjusted EBITDA margin of 14.0%, Core & Main is showcasing its ability to navigate through challenges. It?s like watching a skilled tightrope walker: one wrong step and they could tumble, but they?ve managed to stay upright.

Additionally, the company reported net cash provided by operating activities at $120 million, a notable turnaround from a $37 million outflow last year. This improvement might just be the cash flow equivalent of finding a twenty-dollar bill in last winter's coat pocket.

Strategic Moves Amidst the Numbers

In a bold maneuver, Core & Main executed a $332 million share repurchase while also reducing its diluted shares outstanding by 15 million. This strategic move not only strengthens shareholder value but also indicates confidence in its own stock. Moreover, the company closed three acquisitions during the quarter and signed agreements for more, signaling robust growth ambitions. With these moves, Core & Main is not just sitting on its laurels; it?s actively constructing a more formidable presence in the market.

Looking Ahead: What?s Next for Core & Main?

Core & Main has raised its expectations for fiscal 2023 Adjusted EBITDA to a range of $820 to $880 million. This optimistic outlook is a clear signal that the company is gearing up for a strong performance, even in the face of macroeconomic uncertainties.

As CEO Steve LeClair emphasized, the first quarter reflected a return to typical seasonality, and the company?s focus on local service and infrastructure reliability remains paramount. With an emphasis on growth investments, Core & Main is positioning itself as a key player in the sector. This makes one wonder: could this be the dawn of a new era for infrastructure companies?