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Why Builders FirstSource (BLDR) is a Solid Pick Right Now
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Solid momentum in housing and repair & remodeling markets has been a boon for building product companies. The migration of consumers to larger suburban and second homes is resulting in substantial square footage growth, thereby driving accelerated building products demand.
Among the industry forerunners, Builders FirstSource, Inc. (BLDR - Free Report) has been riding high, given its focus on strategic acquisitions and divestitures, cost synergies as well as digital solutions. Shares of this leading supplier of building materials, manufactured components and construction services have rallied 57.3% over the past year, outperforming the Zacks Building Products – Retail industry’s 17.2% growth.
Full-year 2021 earnings estimates for this Zacks Rank #1 (Strong Buy) company have moved 38.7% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Image Source: Zacks Investment Research
Let’s delve into the major driving factors.
Inorganic Drive
Builders FirstSource remains focused on systematic acquisitions to supplement organic growth and expand extensively across vast geographic boundaries. The company’s first selective targets are those entities manufacturing prefabricated components such as factory-built roof and floor trusses, wall panels, stairs, and engineered wood as well as other value-added products such as vinyl windows and millwork. Secondly, the company intends to enter some of the homebuilding markets wherein it does not currently operate.
On Sep 9, 2021, Builders FirstSource acquired Apollo Software from Katerra — a construction automation startup company. This buyout will help Builders FirstSource align its overall construction process, and transform the construction industry into a modern age of technological revolution and development. During second-quarter 2021, acquisitions contributed to net sales growth of 3.5%.
Also, the company is strategically divesting businesses to focus on long-term plans of pursuing growth initiatives in core value-added business operations. In July 2021, Builders FirstSource agreed to divest Eastern U.S. Gypsum Distribution Operations (“Eastern Gypsum Operations”) to L&W Supply (“L&W”).
Focus on Digital Solutions
Builders FirstSource remains focused on investing in innovations and enhancing digital solutions for customers. During second-quarter 2021, the company adopted new logistics technologies, mainly delivery and dispatch management system. Its digital strategy includes three major areas, firstly to focus on internal processes and productivity by investing in technology to drive operational efficiency as well as excellence, secondly to help streamline interactions with vendors and customers, and lastly to focus on external innovation and investment to offer value-added digital products and services that support customers' success and growth.
Cost-Saving Efforts
Builders FirstSource remains focused on achieving higher operating leverage on the back of increased sales and robust expense controls by offsetting greater variable costs. The company is focused on cost-saving initiatives and implementing various plans for the same. Owing to this, it is expected to provide greater resources to invest in growth, innovation and non-stop value creation for all shareholders. The company’s elevated scale and a very comfortable balance sheet position enable it to project an annual run-rate synergy of $140-$160 million by 2022-end, indicating an overachievement in just two years compared with the original three-year commitment of $130-$150 million.
Solid Expected Earnings Growth
It has solid prospects, as is evident from the Zacks Consensus Estimate for 2021 earnings of $6.27 per share, which indicates 108.3% year-over-year growth. Builders FirstSource is a great pick, supported by a VGM Score of A.
Other Key Picks in Building Products Space
Other top-ranked stocks in the Zacks Retail-Wholesale sector include GMS Inc. (GMS - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and Fastenal Company (FAST - Free Report) . While GMS and Tecnoglass each sport a Zacks Rank #1, Fastenal carries a Zacks Rank #2 (Buy).
GMS’ earnings for fiscal 2022 are expected to rise 59%.
Tecnoglass’ earnings for 2021 are expected to rise 74.7%.
Fastenal has a trailing four-quarter earnings surprise of 2.04%, on average.
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Why Builders FirstSource (BLDR) is a Solid Pick Right Now
Solid momentum in housing and repair & remodeling markets has been a boon for building product companies. The migration of consumers to larger suburban and second homes is resulting in substantial square footage growth, thereby driving accelerated building products demand.
Among the industry forerunners, Builders FirstSource, Inc. (BLDR - Free Report) has been riding high, given its focus on strategic acquisitions and divestitures, cost synergies as well as digital solutions. Shares of this leading supplier of building materials, manufactured components and construction services have rallied 57.3% over the past year, outperforming the Zacks Building Products – Retail industry’s 17.2% growth.
Full-year 2021 earnings estimates for this Zacks Rank #1 (Strong Buy) company have moved 38.7% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s delve into the major driving factors.
Inorganic Drive
Builders FirstSource remains focused on systematic acquisitions to supplement organic growth and expand extensively across vast geographic boundaries. The company’s first selective targets are those entities manufacturing prefabricated components such as factory-built roof and floor trusses, wall panels, stairs, and engineered wood as well as other value-added products such as vinyl windows and millwork. Secondly, the company intends to enter some of the homebuilding markets wherein it does not currently operate.
On Sep 9, 2021, Builders FirstSource acquired Apollo Software from Katerra — a construction automation startup company. This buyout will help Builders FirstSource align its overall construction process, and transform the construction industry into a modern age of technological revolution and development. During second-quarter 2021, acquisitions contributed to net sales growth of 3.5%.
Also, the company is strategically divesting businesses to focus on long-term plans of pursuing growth initiatives in core value-added business operations. In July 2021, Builders FirstSource agreed to divest Eastern U.S. Gypsum Distribution Operations (“Eastern Gypsum Operations”) to L&W Supply (“L&W”).
Focus on Digital Solutions
Builders FirstSource remains focused on investing in innovations and enhancing digital solutions for customers. During second-quarter 2021, the company adopted new logistics technologies, mainly delivery and dispatch management system. Its digital strategy includes three major areas, firstly to focus on internal processes and productivity by investing in technology to drive operational efficiency as well as excellence, secondly to help streamline interactions with vendors and customers, and lastly to focus on external innovation and investment to offer value-added digital products and services that support customers' success and growth.
Cost-Saving Efforts
Builders FirstSource remains focused on achieving higher operating leverage on the back of increased sales and robust expense controls by offsetting greater variable costs. The company is focused on cost-saving initiatives and implementing various plans for the same. Owing to this, it is expected to provide greater resources to invest in growth, innovation and non-stop value creation for all shareholders. The company’s elevated scale and a very comfortable balance sheet position enable it to project an annual run-rate synergy of $140-$160 million by 2022-end, indicating an overachievement in just two years compared with the original three-year commitment of $130-$150 million.
Solid Expected Earnings Growth
It has solid prospects, as is evident from the Zacks Consensus Estimate for 2021 earnings of $6.27 per share, which indicates 108.3% year-over-year growth. Builders FirstSource is a great pick, supported by a VGM Score of A.
Other Key Picks in Building Products Space
Other top-ranked stocks in the Zacks Retail-Wholesale sector include GMS Inc. (GMS - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and Fastenal Company (FAST - Free Report) . While GMS and Tecnoglass each sport a Zacks Rank #1, Fastenal carries a Zacks Rank #2 (Buy).
GMS’ earnings for fiscal 2022 are expected to rise 59%.
Tecnoglass’ earnings for 2021 are expected to rise 74.7%.
Fastenal has a trailing four-quarter earnings surprise of 2.04%, on average.