Builders FirstSource NYSE: BLDR reported first-quarter 2026 results that management characterized as resilient execution and share gains despite what CEO Peter Jackson repeatedly described as a “weak” housing market marked by affordability challenges, muted consumer confidence, and rising uncertainty.
“Our first quarter results reflect the adaptability of our operating model as we delivered strong strategic share growth in a weak housing market,” Jackson said, adding that the company “landed at the upper end of the expected Q1 range for sales” and EBITDA “even as the macro was worse than we expected.”
Housing market backdrop and demand trends
Jackson said housing demand remained pressured by affordability and softer sentiment, and he pointed to geopolitical developments as a new source of volatility. “In recent months, geopolitical tensions have added to market volatility by contributing to higher interest rates and additional inflationary pressure,” he said. Jackson also said that the “surprise of the Middle East conflict” added uncertainty that “undermined the spring selling season.”
While Builders FirstSource saw sequential improvement consistent with seasonal patterns, management described momentum as weaker than earlier expectations. Jackson said sales improved in the first quarter “in line with expectations,” and “daily sales have continued to build in April,” but added that “sentiment is clearly weaker.” Responding to UBS analyst John Lovallo, Jackson said the company saw “a nice build at the beginning of the year,” but that momentum was “not … able to withstand the negative headwinds around uncertainty.”
In multifamily, Jackson said quoting activity was still “active,” but higher rates have deferred projects. He added, “Given the current project pipeline, we don’t anticipate a meaningful improvement in our multifamily results until next year.”
Quarterly results: sales decline, margin pressure, and cost actions
CFO Pete Beckmann said first-quarter performance reflected “disciplined execution in a weak housing market.” Net sales fell 10% year over year to $3.3 billion, which Beckmann attributed to “lower core organic sales and commodity deflation,” partially offset by acquisitions.
- Core organic sales: Beckmann said the decline was driven by an 11% decrease in single-family, reflecting “lower starts activity and reduced value per start.” Multifamily and repair-and-remodel each declined 1%.
- Gross profit and margin: Gross profit was $0.9 billion, down 17%, and gross margin was 28.3%, down 220 basis points, “primarily driven by a declining starts environment,” according to Beckmann.
- Adjusted SG&A: Adjusted SG&A was $740 million, down $31 million, primarily due to lower variable compensation and lower headcount, partially offset by acquisitions.
- Adjusted profitability: Adjusted EBITDA was $214 million, down 42%, with an adjusted EBITDA margin of 6.5% (down 360 basis points). Adjusted EPS was $0.27, down 82%.
Beckmann also detailed “$100 million of cost actions,” comprising $75 million in year-over-year cost reductions and $25 million in cost avoidance. The actions included “deeper cuts to overtime and temporary labor,” adjustments to incentive plans, reduced merit and overhead spending, facility consolidations, and tighter discretionary spend controls. He said the company realized $13 million in the first quarter and is “on track” to achieve the cost reductions in 2026.
Jackson said the company has been consolidating facilities while maintaining service levels. “So far in 2026, we have consolidated 21 facilities following the consolidation of 55 total facilities over the prior two years,” he said, while maintaining an on-time and in-full rate above 90%.
What management said is driving margins
Management fielded several questions about gross margin pressure and the company’s updated outlook. Jackson told William Blair’s Ryan Merkel that the largest surprise in the quarter showed up outside the core lumber and value-added categories. “Where I think we were surprised is in the specialty products and the other categories,” Jackson said, calling the environment “more challenging, more volatile than we expected.”
Barclays analyst Matthew Bouley asked management to rank the drivers behind margin changes. Jackson responded: “The biggest one is the specialty.” He said other factors were more comparable in size, including “the starts impact, the competitive dynamic, the mix impact,” and fuel-related effects on gross margin.
Beckmann noted that mix also played a role as the company’s “bundling program” led to more lumber and sheet goods accompanying value-added sales. He said Builders FirstSource “picked up a little bit more on the lumber and sheet,” which is “a lower margin category,” creating “a little mix impact.”
On inflation pressures, particularly fuel, Beckmann said higher diesel costs are treated as inputs and the company will “surcharge our customers, pass them along,” though management also emphasized that timing and market dynamics can influence results. Jackson later told analysts the company was managing a “negative number” of “probably around $100 million” related to inflation and pass-through dynamics, adding that the impact on the bottom line was “a lot less than that” due to mitigation efforts, “but it’s not zero.”
Goldman Sachs analyst Charles Perron-Piché asked about competitive dynamics and whether weaker players were exiting. Jackson said “there’s a ton of pressure,” adding that smaller players are “certainly struggling,” with some “closed down a lot of facilities” and “significant headcount reductions.” He also described “aggressive behavior” and “irrational behavior” in parts of the market. Jackson said Builders FirstSource is “leaning in a little bit this quarter harder than we have” to take advantage of opportunities, while acknowledging “it’s not easy right now.”
Cash flow, balance sheet, and capital deployment
Builders FirstSource generated operating cash flow of $87 million in the quarter, down $45 million, primarily due to lower net income, Beckmann said. Free cash flow was $43 million. Beckmann cited a trailing 12-month free cash flow yield of approximately 10% and operating cash flow return on invested capital of 13%.
Net debt to adjusted EBITDA was approximately 3.2x. Beckmann said that while this was above the company’s long-term target, management remained “confident in the strength of our balance sheet” with liquidity of $1.5 billion. Jackson later told BMO Capital Markets analyst Ketan Mamtora that the company’s “comfort zone is one to two,” but emphasized that the company and board prioritize a “bulletproof balance sheet with sufficient liquidity.”
During the quarter, Builders FirstSource deployed $360 million toward capital allocation priorities, including $303 million to repurchase 3.3 million shares. Beckmann said the board authorized $500 million in share repurchases, inclusive of $200 million remaining from an April 2025 authorization. Jackson told Bank of America analyst Rafe Jadrosich that the company leaned into repurchases after seeing “the dip this quarter” tied to Middle East-related market dynamics, calling it “an opportunity to pick up shares … at a tremendous discount,” while stating the company would not “impair our strength on the balance sheet or our liquidity position.”
Outlook: updated 2026 guidance and second-half weighting
Beckmann said the company’s updated 2026 outlook reflects “continued weakness in housing starts, ongoing affordability pressure, and a more cautious consumer.” Compared to 2025, management expects:
- Single-family starts: down 2.5%
- Multifamily starts: down 2.5%
- Repair and remodel: down 1%
For 2026, Builders FirstSource guided to:
- Net sales: $14.6 billion to $15.6 billion
- Adjusted EBITDA: $1.1 billion to $1.5 billion
- Adjusted EBITDA margin: 7.5% to 9.6%
- Gross margin: 27.5% to 29%
- Free cash flow: approximately $400 million to $500 million
For the second quarter, the company expects net sales of $3.75 billion to $4.05 billion and adjusted EBITDA of $300 million to $350 million.
Beckmann said the full-year cadence implies “a heavier second half contribution,” reflecting seasonality and easier comparisons as the company laps prior starts declines. He also said the year-over-year change in free cash flow is driven by “a $180 million swing in working capital and lower EBITDA,” as the company anticipates stronger second-half activity that requires working capital investment, particularly receivables.
On commodities, Beckmann said guidance assumes average prices of $390 to $410 per thousand board feet, noting that commodity prices have risen since mid-December due to higher input costs. Jackson and Beckmann also discussed the company’s digital and operational initiatives, including an SAP implementation being rolled out incrementally, with another rollout planned later in 2026 and an acceleration expected to begin in 2027.
In closing remarks, Jackson reiterated the company’s positioning in value-added categories and its view that scale, a digital platform, and installation capabilities provide structural advantages. “With our experienced, cycle-tested team, we expect to deliver solid results in the near term and significant upside when the market recovers,” he said.
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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