Simpson Manufacturing (NYSE: SSD) reported Q3 EPS of $1.54, $0.59 better than the analyst estimate of $0.95. Revenue for the quarter came in at $364.3 million versus the consensus estimate of $312.4 million.

• Net sales of $364.3 million increased 17.5% year-over-year
• Strong gross margin of 47.6% improved 3.2% year-over-year
• Income from operations of $91.3 million increased 49.8% year-over-year, operating margin of 25.1% increased 5.4% year-over-year
• Diluted earnings per share of $1.54 increased 58.8% year-over-year
• Updating full year 2020 financial guidance on improved demand outlook
• Declared a $0.23 per share cash dividend

Management Commentary

"We delivered strong third quarter results with our sales increasing 17.5% year-over-year and 11.7% quarter-over-quarter to $364.3 million on significantly higher volume," commented Karen Colonias, the Company's President and Chief Executive Officer. "Our sales volume improved primarily due to ongoing momentum in our home center and co-op customers as we have continued to benefit from the shift in consumer behavior toward home renovations as a result of the COVID-19 pandemic. Sales volumes were supported by the return of Lowe's as a home center customer in the second quarter of 2020. By the end of October, we expect nearly all 1,737 Lowe's stores will be set with our industry-leading connectors, mechanical anchor and fastener product solutions. Our sales were further supported by improving U.S. housing starts and the recovery in Europe following government shutdowns in the United Kingdom and France due to COVID-19 in late March. In addition, we achieved a considerable improvement in our gross margin to 47.6% in the third quarter of 2020 from 44.4% in the third quarter of 2019. The strength in our gross margin, combined with our effective expense management, helped drive a 49.8% year-over-year increase in our income from operations to $91.3 million and strong earnings of $1.54 per diluted share."

Mrs. Colonias continued, "While our focus over the past seven months has been on cash preservation to ensure our working capital needs could be met in the near-term due to uncertainty related to COVID-19, we have been grateful to be able to operate as a supplier to other essential businesses with minimal disruptions. As such, we are continuing to support our growth strategy in identifying M&A opportunities that would complement our existing product offering and manufacturing footprint or strengthen our software capabilities. In-line with this initiative, we recently made two strategic asset purchases including the acquisition of a small connector manufacturer in the United Kingdom that we expect to improve our market share in Europe and a small software application that we believe will strengthen our value proposition for builders."

Mrs. Colonias concluded, "At Simpson, we value our employees' health, safety and wellbeing as our top priority and strive for continuous improvement to ensure our Company remains a safe and rewarding place to work. Our diligence, including strict adherence to protocols to help minimize the spread of COVID-19, has enabled us to continue operating our business, while executing against our strategic, operational and financial initiatives in order to maximize shareholder value."

Business Outlook

On July 27, 2020, the Company reinstated its 2020 full-year outlook originally provided on February 3, 2020. The Company is updating its full year outlook, primarily reflecting three quarters of actual results, as well as improved visibility on the progression of pandemic-related restrictions and the impact of those restrictions on the Company's operations. Based on business trends and conditions as of today, October 26, the Company's outlook for the full fiscal year ending December 31, 2020 is as follows:

• Net sales are estimated to increase in the range of 9.0% to 10.0% compared to the full year ended December 31, 2019.
• Gross margin is estimated to be in the range of 45.0% to 46.0%.
• Operating expenses, as a percentage of net sales, are estimated to be in the range of 25.0% to 26.5%.
• The effective tax rate is estimated to be in the range of 24.5% to 26.0%, including both federal and state income tax rates.

While the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain, the Company is continuing to monitor the impact of the outbreak on its operations and financial condition, which was not significantly adversely impacted in the second quarter or third quarter of 2020. Please note that ongoing uncertainties surrounding the impact of COVID-19 on the Company's business, which may include the economic impact on its operations, raw material costs, consumers, suppliers, vendors, and other factors outside of its control, may have a material adverse impact on the Company's financial outlook.

For earnings history and earnings-related data on Simpson Manufacturing (SSD) click here.