Builders FirstSource (NYSE:BLDR) reported lower second-quarter sales and earnings as weak housing demand, affordability pressures and competitive pricing weighed on residential construction activity. The company reduced its full-year outlook, citing a more cautious view of housing starts, while outlining additional cost reductions and continued investment in value-added products, technology and acquisitions.
Net sales fell about 9% year over year to $3.9 billion in the second quarter. Core organic sales declined 8% in single-family construction, 10% in multifamily and 2% in repair and remodel, partially offset by acquisition-related growth. Adjusted EBITDA declined 35% to $329 million, while adjusted EBITDA margin contracted 350 basis points to 8.5%. Adjusted earnings per share fell 51% to $1.17.
“We cannot control the market, but consistent execution against these priorities will strengthen how we operate today and position us to accelerate growth as conditions improve,” Jackson said.
Housing demand pressures prompt lower outlook
Builders FirstSource now expects 2026 single-family starts to decline nearly 7% from 2025, while multifamily starts are projected to fall 4% and repair-and-remodel activity is expected to decline 1%. The company guided for full-year net sales of $14 billion to $14.8 billion, adjusted EBITDA of $1 billion to $1.2 billion, and adjusted EBITDA margin of 7.1% to 8.1%.
For the third quarter, the company expects net sales between $3.6 billion and $3.9 billion and adjusted EBITDA of $275 million to $325 million.
Jackson said builders have been managing elevated inventory levels and, in some markets, moving toward a greater mix of build-to-order homes rather than speculative construction. He said that trend supports Builders FirstSource’s product bundling, sales capabilities and digital tools, although the shift is not expected to materially change the company’s lag between housing starts and sales.
Management said sales trends weakened into July, with the normal seasonal rise in activity failing to materialize at the expected level. Jackson said the company does not anticipate the sharp pullback in builder activity seen late last year, however, as builders appear to be more closely matching starts to home sales and are more comfortable with inventory positions.
Regionally, management identified continued softness in Texas and Colorado, partly offset by relative strength in the Northeast. The company also expects multifamily conditions to remain pressured for the rest of the year because higher interest rates have delayed project starts and developers remain cautious about beginning new projects.
Margins decline as competitive market persists
Second-quarter gross profit decreased 16.3% to $1.1 billion, and gross margin fell 260 basis points to 28.1%. CFO Pete Beckmann attributed the decline primarily to lower housing starts and the resulting pressure on operating leverage.
Builders FirstSource expects full-year gross margin of 27.5% to 28.5%. Management said margins should remain generally stable from current levels through the second half, though the midpoint of the full-year outlook implies a modestly lower margin than the first-half average.
Jackson said competitive pricing conditions have begun to stabilize in aggregate, though volatility remains in certain product categories and markets. He said the company will continue to compete for business but plans to avoid sales that do not meet its profitability requirements.
Commodity-price guidance was unchanged. The company expects average commodity prices of $390 to $410 per thousand board feet for the year, near the long-term average of $400. Beckmann said lumber prices rose through the second quarter as anticipated and are expected to moderate somewhat in the second half, while oriented strand board prices remain weak.
Cost actions, facility consolidation and capital discipline
Adjusted selling, general and administrative expense declined by $37 million to $781 million, helped by lower variable compensation, reduced headcount and prior cost actions. Higher fuel and delivery expenses and acquired operations partly offset those benefits.
The company said it remains on track to deliver previously announced cost reductions and has identified an additional $40 million of run-rate savings. In the question-and-answer session, management described the plan as $115 million of annualized cost cuts, consisting of $75 million in previously identified cuts and the additional $40 million. Because the incremental actions began in July, management said roughly $15 million of the additional savings is expected to be realized in 2026, with the remainder carrying into 2027.
- Builders FirstSource has consolidated 36 facilities in 2026 and 91 facilities over the past two and a half to three years.
- The company said its on-time and in-full delivery rate has remained above 90% despite the consolidations.
- Management said the new savings efforts are concentrated in SG&A and fixed costs, including overtime, temporary labor, incentive compensation, merit increases, overhead and discretionary spending.
- The company also generated $28 million of productivity savings in the quarter through supply-chain and logistics initiatives.
Management said it has also reduced capital spending plans by $50 million, largely by delaying some replacement spending on fleet and equipment and scaling back growth investments in markets where its existing footprint can serve demand.
Cash flow, leverage and M&A remain in focus
Second-quarter operating cash flow was $68 million, down from $341 million a year earlier, reflecting lower net income. Free cash flow was $32 million for the quarter, and the company expects full-year free cash flow of about $400 million to $500 million.
Net debt to adjusted EBITDA was approximately 3.6 times, above the company’s long-term target range. Beckmann said management remains comfortable with the leverage position given $1.6 billion of liquidity, expected cash generation and debt maturities, and expects leverage to return to its target range as EBITDA recovers with the market.
Capital deployment in the quarter included $36 million of capital expenditures and $14 million for acquisitions, with no share repurchases. In June, Builders FirstSource acquired Precision Design and Trim, expanding its installation capabilities in the Boise area.
Jackson said acquisitions remain a core element of the company’s long-term strategy. Since its 2021 merger with BMC, Builders FirstSource has completed 42 acquisitions representing nearly $2.3 billion in annual sales. Management said it continues to evaluate acquisition opportunities in attractive geographies and value-added product categories, though deal sizes and capital deployment are likely to be smaller in the current market environment.
About Builders FirstSource (NYSE:BLDR)
Builders FirstSource, Inc is a leading supplier of structural and value-added building products and services to professional contractors, homebuilders and remodelers. The company provides a comprehensive range of materials and prefabricated components that support all phases of residential construction, from site development and framing to finishing and installation.
The company’s core offerings include lumber and lumber sheet goods, windows and doors, millwork, roofing and siding, and engineered wood products such as roof and floor trusses.
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