Buy The Dip In Simpson Manufacturing


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A good quarter for Simpson is not rewarded

Actions of Simpson Manufacturing (NYSE: SSD) fell sharply in the wake of third quarter results, but not for the right reasons. It would be one thing if the business of the company weakens or if the demand decreases, but it is not. Simpson stock is going down for the wrong reasons and opens up what we see as another entry point to a high quality dividend producer.

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You see, Simpson produced YOY revenue growth, margin expansion and improved cash flow with only one flaw. The top line missed consensus estimates and there are factors affecting performance that make the numbers less than comparable. The most obvious difference is that last year’s sales through retail channels were bolstered by a build-up at Lowe’s that did not take place this year. Regardless, the business is strong and the outlook for growth is positive.

“Our strong cash generation enabled us to invest $ 12.0 million in capital expenditures during the quarter, as well as pay out $ 10.9 million in dividends and repurchase $ 24.1 million in capital expenditures. common stock of Simpson. As the macroeconomic landscape remains challenging for Simpson and its customers due to persistent global supply chain constraints, limited steel availability and a tight labor market, we continue to implement the elements. keys to our business model to ensure we are meeting the needs of our customers, ”said Karen Colonias, CEO of Simpson Manufacturing.

Simpson Manufacturing Increases Revenue and Expands Margins

Simpson Manufacturing missed consensus estimate for sales over 1,100 basis points and that’s no joke. The combined impact of difficult comparisons, the changing composition in the retail segment and supply chain hurdles is to blame. In North America, price increases more than offset a slight drop in volumes while in Europe both volume and price increases are in play. The good news, at least for Simpson, is that the price increases have so far been able to overcome inflationary pressures and have resulted in wider margins.

Going down to the revenue portion of the report, the company was able to expand the margin both at the gross level and at the operating level despite shrinking margins in the EU segments. Gross margin was 49.6% or up 230 basis points year-on-year, while operating margin increased 30 basis points, resulting in an increase in GAAP earnings of 10 basis points. , 4% compared to last year. BPA GAAP also missed the consensus, but with a much smaller margin than revenue, and left the company in good financial shape. The company was already in net cash with a fortress balance sheet, this situation improved during the quarter.

The technical outlook: Simpson withdraws from support

Simpson Manufacturing shares fell more than 10% in intraday trading after the release of third quarter results. The movement has stock trading at a key level of assistance at the bottom of a trading range where support is already showing. Price action confirmed support at the $ 105 level with a large doji candle suggesting some market indecision is still present. Price action may continue to decline in the near term and test or retest support at the $ 105 level, so investors should remain cautious with new money. The indicators show divergences which reinforce the idea of ​​support at current levels but bearish signals are still present in the short term.

If the price action is unable to maintain support at the $ 105 level, a decline to $ 100 and possibly as low as $ 90 becomes very likely. Analysts are optimistic on this title but, according to data, There are a single analyst with a caliber that we can call current. That company is Robert Baird and has a price target of $ 135 or more than a 20% rise for the stock.

Buy The Dip In Simpson Manufacturing


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