TopBuild's (NYSE:BLD) Q3: Beats On Revenue

Building services and installation company TopBuild (NYSE:BLD) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 1.4% year on year to $1.39 billion. The company expects the full year’s revenue to be around $5.4 billion, close to analysts’ estimates. Its non-GAAP profit of $5.36 per share was 1.3% above analysts’ consensus estimates.

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Robert Buck, President and CEO of TopBuild, said, “Third quarter results were in line with expectations. Sales totaled $1.4 billion in the third quarter, up 1.4% including acquisitions, as our Installation Services segment sales grew 0.2% and Specialty Distribution sales improved 1.4%. Our team’s efforts to drive productivity and operational excellence are reflected in the continued strength of our profitability.

Company Overview

Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, TopBuild’s 14.5% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. TopBuild’s recent performance shows its demand has slowed significantly as its revenue was flat over the last two years.

This quarter, TopBuild reported modest year-on-year revenue growth of 1.4% but beat Wall Street’s estimates by 1.2%.

Looking ahead, sell-side analysts expect revenue to grow 13.5% over the next 12 months, an improvement versus the last two years. This projection is admirable and implies its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

TopBuild has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 15.9%. 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.

Looking at the trend in its profitability, TopBuild’s operating margin rose by 1.2 percentage points over the last five years, as its sales growth gave it operating leverage. Its expansion was impressive, especially when considering most Home Builders peers saw their margins plummet.

This quarter, TopBuild generated an operating margin profit margin of 15.4%, down 2.3 percentage points year on year. Since TopBuild’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.

TopBuild’s EPS grew at an astounding 25.2% compounded annual growth rate over the last five years, higher than its 14.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of TopBuild’s earnings can give us a better understanding of its performance. As we mentioned earlier, TopBuild’s operating margin declined this quarter but expanded by 1.2 percentage points over the last five years. Its share count also shrank by 15.1%, 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 shorter period to see if we are missing a change in the business.

For TopBuild, its two-year annual EPS growth of 2.5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, TopBuild reported adjusted EPS of $5.36, down from $5.68 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 1.3%. Over the next 12 months, Wall Street expects TopBuild’s full-year EPS of $20.43 to grow 6.2%.

Key Takeaways from TopBuild’s Q3 Results

It was good to see TopBuild narrowly top analysts’ revenue expectations this quarter. We were also happy its EBITDA narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance slightly missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $421.01 immediately after reporting.

Big picture, is TopBuild a buy here and now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.