Beacon Roofing Supply, Inc. (BECN Quick QuoteBECN - Free Report) has been performing well of late driven by its acquisition of Allied Building Products, record performance in fiscal 2017 and an upbeat guidance for fiscal 2018. Further, the performance has also been buoyed by anticipated benefits from the rebuilding activity triggered by the two back-to-back hurricanes Harvey and Irma.

 

We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and poised to carry the momentum ahead.

 

 

Favorable Zacks Rank: Beacon Roofing sports a Zacks Rank #1 (Strong Buy) with an impressive VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows you to eliminate the negative aspects of stocks and select winners. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) offer the best upside potential.

 

Industry-Leading Price Performance: The company’s share price has gained 44.4% over a year’s time, outperforming the industry’s growth of 39.8%.

 

 

Upward Estimate Revisions: The Zacks Consensus Estimate for fiscal 2018 has moved up 22% in the past 60 days while the same for fiscal 2019 has gone up 33%.

 

Healthy Growth Prospects:  The Zacks Consensus Estimate for earnings for fiscal 2018 is pegged at $3.16, depicting year-over-year growth of 45%. The estimate for fiscal 2019 of $4.00 reflects year-over-year growth of 26.4%.

 

The stock has an estimated long-term earnings growth rate of 15%.

 

Positive Earnings Surprise History: Beacon Roofing has delivered a positive average earnings surprise of 6.40% in the last four quarters.

 

Upbeat Fiscal 2018 Guidance: Beacon Roofing projects total sales in the range of $6.6-$6.9 billion for fiscal 2018, representing expected sales growth rate of 51-58% over fiscal 2017. Adjusted EBITDA is projected to be in the range of $560-$600 million and adjusted EPS is expected to come in between $2.95 and $3.25. For comparison basis, Beacon Roofing’s adjusted earnings per share was pegged at $2.68 in fiscal 2017. 

 

Growth Drivers: Through the recently closed Allied Building acquisition, Beacon Roofing will become one of the largest public wholesale building materials distributors in the United States and Canada. The buyout will not only expand product offerings, but also increase geographical reach in both existing and new markets while ensuring significant cost synergies. With projected revenues of roughly $7 billion from the combined company, it will be an increase of 69% in the company's annual revenues from current levels. It will also add about 50-60 cents to earnings per share in the first year. The combined company is anticipated to realize $110 million in run-rate synergies within two years of the closure of the deal. In addition to growth through acquisitions, the company also remains focused on attaining organic growth.

 

Meanwhile, Beacon Roofing will benefit from strong sales growth within the three product lines in fiscal 2018. The complementary products segment is expected to be the strongest performing segment in 2018 given conducive conditions. The company is focused to broaden this category, both organically and through acquisitions. It is a very large and growing market, and one of the elements that is expected to fuel growth moving forward. Both commercial and residential roofing is anticipated to go up in fiscal 2018.The company is also anticipated to benefit from the rebuilding activity triggered by the back-to-back hurricanes.

 

 

Some other top-ranked stocks worth considering in the sector include Conn's, Inc. (CONN Quick QuoteCONN - Free Report) , PetMed Express, Inc. (PETS Quick QuotePETS - Free Report) and Boot Barn Holdings, Inc. (BOOT Quick QuoteBOOT - Free Report) .

 

Conn's sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. Conn's has an estimated long-term earnings growth of 23%. Its shares have surged 230% over the past year.

 

PetMed Express has an estimated long term earnings growth of 10%. Its shares have surged 132% in the last year.

 

Boot Barn Holdings has an estimated long term earnings growth of 15.7%. Its shares have gained 66% over a year’s time.

 

 

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