Taking a look at the figures, total revenue climbed by 24% year/year to $1.4 bln, exceeding analysts' $1.3 bln expectations. What really stands out is the encouraging trend developing in terms of revenue growth over the past year. Going back to 2Q17, BCC's revenue growth has progressed at higher rates each quarter: 2Q17 saw revenue growth of +9.1%, followed by +14.9% in 3Q17; +18.8% in 4Q17; +21.4% in 1Q18; and today’s mark, +23.6% in 2Q18.
Of course, BCC's performance is largely tied to new residential construction in the U.S. The most recent data shows that June housing starts came in at a seasonally adjusted rate of 1.17 mln, about 4.2% below last June's 1.34 bln rate. While lower from a year ago, the overall housing market remains healthy, as a tighter supply has lifted prices -- seen in BCC's results, as we show below. Furthermore, as of July 2018, the Blue Chip Economic Indicator forecast for 2018 is anticipating housing starts at 1.32 mln, compared to 1.2 mln in 2017.
Breaking it down by segment, Wood Products (30% of revenue), which includes laminated lumber beams and I-joists, experienced a 21% jump in revenue to $425.5 mln. Sales prices for I-joists and laminated veneer lumber increased 12% and 10%, respectively, resulting in increased sales of $8.8 mln and $7.7 mln, respectively.
Turning to its Building Materials business (70% of revenue), which includes engineered wood products, plywood, siding, metal products, and roofing, sales increased by 24% to $1.2 bln. The growth here was driven by a 15% bump in sales prices along with sales volumes growing by 9%.
While the strong pricing dynamics helped BCC on the top line, higher commodity prices did take a bite out of some its growth. Materials and Labor expenses were up 22% to $1.19 bln, driven by higher per-unit costs of logs and OSB, used in the manufacturing of I-joists. The good news, however, is that as a percentage of sales, materials and labor decreased by 470 basis points year/year due to improved leveraging of wood fiber and labor costs. Overall, the company’s operating margin improved sharply to 5.3% from 3.7% in 2Q17.
The solid jump in revenue and improved margins led to EPS surging to $1.06 from $0.57 a year ago. In fact, the $1.06 mark is the highest EPS BCC has generated since going public in 2013. Also, cash flow from operations soared by 180% to $88.3 mln.
All in all, it was a solid report from BCC as the company continues to benefit from a favorable pricing environment, a strong market position, and good execution in terms of cost management.