Builders FirstSource Q3 Adjusted EBITDA Falls 28% as 2026 Outlook Narrows

Builders FirstSource (BLDR) reported lower third-quarter earnings as weaker single-family construction activity pressured core sales and profitability, while acquisitions and lumber-related growth provided partial offsets. The building-products supplier also narrowed its 2026 outlook ranges and said it remains on track to deliver $115 million of cost actions this year.

Net sales declined 2.2% year over year to $3.85 billion in the third quarter. Gross profit fell 10.6% to about $1.1 billion, with gross margin at 27.8%. Adjusted EBITDA, a non-GAAP measure, dropped 28.3% to $311 million from $434 million, reducing the adjusted EBITDA margin to 8.1%.

GAAP net income was $60.4 million, compared with $122.4 million a year earlier. Adjusted net income was $162.2 million, equal to 4.2% of sales, while adjusted diluted earnings per share decreased 24.5% to $1.51. The company generated $76 million of free cash flow during the quarter.

Single-family weakness weighs on core sales

Core organic sales, which exclude commodities, acquisitions and selling-day differences, decreased 3.9%. Acquisitions contributed 1.8 percentage points to sales, while commodity deflation had a 0.1-point negative effect.

Single-family core organic sales fell 6%, reflecting lower housing-start activity and reduced value per start. Multi-family sales rose 2%, driven by higher volumes of lumber and lumber sheet goods. Repair and remodel and other sales increased 0.3%, with the company describing growth as muted amid consumer uncertainty.

Value-added core organic sales declined 6%. Manufactured-products sales fell 4%, primarily because of lower engineered-wood-product sales and, to a lesser extent, reduced truss and wall-panel sales. Windows, doors and millwork decreased 8% as weakness in doors and millwork outweighed growth in windows. Specialty building products and services declined 5% due mainly to lower pricing and volumes.

Lumber and lumber sheet goods were the strongest product category, with core organic sales up 2%. On a reported basis, sales in that category increased 5% to $1.04 billion. Reported sales declined 3% to $845 million for manufactured products, 7% to $938 million for windows, doors and millwork, and 3% to $1.03 billion for specialty building products and services.

Value-added products represented about 46% of third-quarter sales and approximately 47% of the year-to-date mix. Builders FirstSource said it gained roughly one to two percentage points of market share during the challenging market environment.

Cost actions and capital deployment

The company recorded $23 million of productivity savings in the third quarter and $57 million year to date through operational-excellence and supply-chain initiatives. Management expects $60 million to $70 million of productivity savings for the full year, compared with its previous assumption of $50 million to $70 million.

Builders FirstSource said it remains on track for $115 million of cost actions in 2026, equivalent to about $140 million on a full run-rate basis. Its measures include optimizing capacity, tightening discretionary and overhead spending, managing headcount, reducing capital expenditures and accelerating its digital and technology transformation.

The company deployed about $161 million during the quarter, including roughly $71 million to sustain the business and advance its digital strategy and approximately $91 million on two acquisitions. Year-to-date capital deployment totaled about $571 million, comprising $151 million for organic growth, $117 million for acquisitions and $303 million for share repurchases.

Since its 2021 merger with BMC, Builders FirstSource has completed 44 acquisitions representing approximately $2.5 billion in estimated annual sales.

2026 outlook ranges narrowed

Builders FirstSource now expects 2026 net sales of $14.2 billion to $14.6 billion, compared with its previous range of $14.0 billion to $14.8 billion. The company maintained its projected gross-margin range of 27.5% to 28.5%.

Adjusted EBITDA is forecast at $1.075 billion to $1.125 billion, narrowing the prior range of $1.0 billion to $1.2 billion. The corresponding adjusted EBITDA margin is expected to be 7.4% to 7.9%, versus the previous range of 7.1% to 8.1%.

The company projects free cash flow of $400 million to $450 million, compared with its earlier range of $400 million to $500 million. Capital expenditures remain forecast at $175 million to $225 million, while expected interest expense increased to $290 million to $300 million from $280 million to $290 million.

Management’s full-year assumptions continue to call for single-family housing starts in Builders FirstSource markets to decline about 7%, multi-family starts to fall about 4%, and repair-and-remodel activity to decrease 1%. The assumed commodity-price range remains $390 to $410 per thousand board feet. Expected sales growth from acquisitions completed during the last 12 months is now 1.5% to 2%, compared with the previous 1% assumption.

Builders FirstSource ended the quarter with approximately $1.5 billion of liquidity, including about $1.4 billion of net availability under its revolving credit facility and $100 million of cash. Net leverage stood at 4.1 times, and the weighted-average debt maturity was approximately six years.

The company’s results and outlook remain sensitive to housing activity, affordability, interest rates, consumer confidence, tariffs, labor and supply constraints, and lumber and other commodity prices. Additional uncertainties include acquisition integration, indebtedness, the execution of digital and artificial-intelligence initiatives, and implementation of its enterprise resource planning system. The free-cash-flow outlook includes estimated 2026 expenses related to the SAP implementation.