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Gibraltar (ROCK) Rides on Value Creation Strategy, Costs Ail
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On Aug 10, we issued an updated research report on Gibraltar Industries, Inc. (ROCK - Free Report) , a leading manufacturer and distributor of building products for industrial, infrastructure and residential markets.
Gibraltar recently reported better-than-expected results in the second quarter of 2018. The company’s top and bottom lines both surpassed the Zacks Consensus Estimate by 1.5% and 29.1%, respectively. Its quarterly earnings and revenues increased 65.1% and 7.4% year over year, respectively, backed by robust domestic demand in Renewable Energy & Conservation as well as Industrial & Infrastructure businesses, along with a solid value creation strategy.
Key Growth Drivers
Robust Demand: Gibraltar’s Renewable Energy and Conservation segments grew 17.4% and 14.1% year over year in the second quarter and first six months of 2018, respectively. The performance was backed by robust demand, which is expected to continue through 2018. Strong demand for community solar, which is the market Gibraltar serves, as well as robust growth on the Conservation front, attributable to the cannabis market, are driving the segment’s performance.
Value Creation Strategy: Gibraltar’s four-pillar value creation strategy, which comprises operational excellence, product innovation, portfolio management and acquisitions as a strategic accelerator, is one of the notable reasons for its growth. Apart from prudently focusing on operational excellence by simplifying its products via better cost management, the company has also been banking on product innovation. Notably, innovative products increased to 9% of the revenues during the second quarter of 2018. Portfolio management, the third pillar, as well as the acquisitions strategy (fourth and the last pillar) have also been benefiting the company by boosting the bottom line. In fact, acquisition is a key strategy of Gibraltar’s transformation. The company remains committed to acquire those companies that have a significant long-term value.
Solid Fundamentals of Homebuilding Market: Overall fundamentals of the housing market have remained strong so far this year and are expected to improve further in 2019. Gibraltar’s Residential Products segment is the major one to benefit from the robust homebuilding industry scenario in the United States.
Share Price Performance: Gibraltar’s shares have gained 31.4% year to date against its industry’s decline of 11.2%. The uptrend was backed by an increased percentage of U.S. housing starts & building permits, impressive labor-market scenario, upbeat wage rates, and modest inflation. Trump’s most-awaited $1.5-trillion infrastructure plan will likely demand more building and infrastructure spending in the near future, which may boost revenues and profitability of construction companies like Gibraltar.
Concerns
Material Cost Hike: Gibraltar’s gross margin contracted 140 basis points year over year in the second quarter, primarily owing to increased cost of sales. The input cost inflation primarily elevated the company’s cost of sales by 6.1% year over year in the reported quarter. Rising costs may worsen its bottom-line performance in the quarters ahead.
In fact, the Zacks Consensus Estimates for earnings have moved south by 10.3% for the current quarter over the past 30 days. However, estimates have remained stable for 2018 over the same time frame.
Dependence on Government Funding: Demand in the Gibraltar’s construction market is highly dependent on government funds, since it prepares complex designing components for elevated highways and bridges that involve long gestation period. The company is exposed to customer concentration risks. Also, the termination of any of its customers may lead to a possibility of severe loss.
Zacks Rank and Stocks to Consider
Currently, Gibraltar carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Continental Building Products, Inc. , NCI Building Systems, Inc. and PGT Innovations, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can also see the complete list of today’s Zacks Rank #1 stocks here.
Continental’s current-year earnings are expected to increase 50.4%.
Current-year earnings for NCI are projected to grow 77.5%.
PGT’s current-year earnings are likely to grow 78.7%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Gibraltar (ROCK) Rides on Value Creation Strategy, Costs Ail
On Aug 10, we issued an updated research report on Gibraltar Industries, Inc. (ROCK - Free Report) , a leading manufacturer and distributor of building products for industrial, infrastructure and residential markets.
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Gibraltar recently reported better-than-expected results in the second quarter of 2018. The company’s top and bottom lines both surpassed the Zacks Consensus Estimate by 1.5% and 29.1%, respectively. Its quarterly earnings and revenues increased 65.1% and 7.4% year over year, respectively, backed by robust domestic demand in Renewable Energy & Conservation as well as Industrial & Infrastructure businesses, along with a solid value creation strategy.
Key Growth Drivers
Robust Demand: Gibraltar’s Renewable Energy and Conservation segments grew 17.4% and 14.1% year over year in the second quarter and first six months of 2018, respectively. The performance was backed by robust demand, which is expected to continue through 2018. Strong demand for community solar, which is the market Gibraltar serves, as well as robust growth on the Conservation front, attributable to the cannabis market, are driving the segment’s performance.
Value Creation Strategy: Gibraltar’s four-pillar value creation strategy, which comprises operational excellence, product innovation, portfolio management and acquisitions as a strategic accelerator, is one of the notable reasons for its growth. Apart from prudently focusing on operational excellence by simplifying its products via better cost management, the company has also been banking on product innovation. Notably, innovative products increased to 9% of the revenues during the second quarter of 2018. Portfolio management, the third pillar, as well as the acquisitions strategy (fourth and the last pillar) have also been benefiting the company by boosting the bottom line. In fact, acquisition is a key strategy of Gibraltar’s transformation. The company remains committed to acquire those companies that have a significant long-term value.
Solid Fundamentals of Homebuilding Market: Overall fundamentals of the housing market have remained strong so far this year and are expected to improve further in 2019. Gibraltar’s Residential Products segment is the major one to benefit from the robust homebuilding industry scenario in the United States.
Share Price Performance: Gibraltar’s shares have gained 31.4% year to date against its industry’s decline of 11.2%. The uptrend was backed by an increased percentage of U.S. housing starts & building permits, impressive labor-market scenario, upbeat wage rates, and modest inflation. Trump’s most-awaited $1.5-trillion infrastructure plan will likely demand more building and infrastructure spending in the near future, which may boost revenues and profitability of construction companies like Gibraltar.
Concerns
Material Cost Hike: Gibraltar’s gross margin contracted 140 basis points year over year in the second quarter, primarily owing to increased cost of sales. The input cost inflation primarily elevated the company’s cost of sales by 6.1% year over year in the reported quarter. Rising costs may worsen its bottom-line performance in the quarters ahead.
In fact, the Zacks Consensus Estimates for earnings have moved south by 10.3% for the current quarter over the past 30 days. However, estimates have remained stable for 2018 over the same time frame.
Dependence on Government Funding: Demand in the Gibraltar’s construction market is highly dependent on government funds, since it prepares complex designing components for elevated highways and bridges that involve long gestation period. The company is exposed to customer concentration risks. Also, the termination of any of its customers may lead to a possibility of severe loss.
Zacks Rank and Stocks to Consider
Currently, Gibraltar carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Continental Building Products, Inc. , NCI Building Systems, Inc. and PGT Innovations, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can also see the complete list of today’s Zacks Rank #1 stocks here.
Continental’s current-year earnings are expected to increase 50.4%.
Current-year earnings for NCI are projected to grow 77.5%.
PGT’s current-year earnings are likely to grow 78.7%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>