Back to top

Analyst Blog

Beacon Roofing Supply, Inc. (BECN - Analyst Report) has recently acquired San Jose-based Ford Wholesale Co., a distributor of residential and commercial roofing and related accessories and Construction Materials Supply, a distributor of residential roofing products. 
 
These acquisitions mark Beacon Roofing’s foray into the attractive North California market. The Ford Wholesale acquisition will add three locations in the region to Beacon Roofing’s kitty while Construction Materials Supply will add two stores. The two acquisitions will increment Beacon Roofing’s sales by approximately $60 million.
 
As of November 30, 2012, the company had 10 locations in the California compared with 4 locations as of November 30, 2011. The company now intends to increase its presence in the North California market. 
 
Acquisitions are an important part of Beacon Roofing’s growth strategy. Over the last 10 years, the company has grown through a combination of 22 strategic and complementary acquisitions, including opening new branch locations, acquiring branches and broadening its product offering. Sales have grown at a 10-year compound annual growth rate of 14.0%. The company’s internal growth, which includes growth from existing and newly opened branches but excludes growth from acquired branches, has averaged 4.7% annually over the same period.
 
Earlier, the company announced the acquisition of Structural Materials Company in Southern California, Contractors Roofing & Supply Co. in St. Louis and Pennsylvania-based McClure-Johnston Company. The company’s prime focus is to target market leaders in geographic areas where it does not have a presence. Beacon Roofing also acquires companies to supplement branch openings within existing markets. Beacon Roofing remains fairly active on the acquisition front and we expect the acquisitions to continue at an accelerated pace in the near term.
 
However, this acquisition driven growth strategy exposes the company to acquisition related risks. Management may have trouble finding suitable acquisition candidates that provide synergies in existing markets and upfront earnings accretion.
 
Both U.S. residential and non-residential construction sectors are finally stabilizing and are on the road to a much-awaited recovery, which bodes well for the Beacon Roofing. Demand for re-roofing is also on the rise given an aging U.S. housing stock. Beacon Roofing currently maintains a Zacks #3 Rank (Hold) over the short term.
 
Beacon Roofing is a leading distributor of roofing materials and complementary building products. It currently operates 229 branches encompassing 38 states in the United States and Canada. Lumber Liquidators Holdings, Inc. (LL - Snapshot Report) is another Zacks #3 Rank stock in the same industry.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%