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Bear of the Day: Gibraltar Industries (ROCK)

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Gibraltar Industries (ROCK - Free Report) is a Zacks Rank #5 (Strong Sell) that manufactures and distributes products for renewable energy, conservation, residential, and infrastructure markets in North America and Asia. Their products range from ventilation and expanded metal to mail storage solutions and raid dispersion products and solutions.

After a run of over 200% from the March lows, the stock sits about 10% below all-time highs. After a recent earnings miss, investors have to decided whether its time to take profits as earnings estimates start to fall.

More about ROCK

Gibraltar is headquartered in Buffalo, New York and employs over 2300.The company is valued around $3 billion and has a Forward PE of 26. ROCK has Zacks Style Scores of “F” in Value but “A” in Momentum. The company does not pay a dividend.

The company had been on a nice streak of beating earnings, surprising to the upside for five straight quarters. However, when the company reported in late February investors were surprised with a rare miss, which sent the stock down about 15% in a week.

Q4 Earnings

Q4 earnings came in above last year’s numbers, but ROCK reported a 6.35% earnings miss. The company guided FY21 below expectations, seeing $3.30-47 v the $3.80 expected. Revenues were also guided below expectations.

There were some short-term setbacks as project delays in the renewable segment were delayed, which led to lower margins. While residentials rose on strong demand, infrastructure sales were down.

Investors will be watching for a bounce back in these numbers next quarter, but if there is no turn around, the stock will see pressure.

Estimates

While estimates don’t look bad across the board, the next quarter and the current year are seeing some pressure. Over the last 60 days, we have seen a drop of 15% for the next quarter. For the current year, estimates have fallen 10% over that same time frame.

The Technicals

The stock has had quite the run over the last year, so you can’t blame investors for taking profits when earnings missed. Looking at the charts, the bulls might have more reasons to be cautious.

After earnings, the stock broke the 50-day moving average for the first time since late November. While the stock quickly bounced back above that level, the stock once again lost traction and has become fairly volatile.

For now, the stock is chopping around the 50-day MA at $92 as if there is a big wall that can’t be passed. If the bulls can get a solid move on high volume above this level, perhaps new highs can come.

However, if the up move fails, investors should watch for a drop back to the post earnings lows around $80. If there is overall market weakness, the 200-day moving average is at $71 and would make a better long-term entry point.

In Summary

Gibraltar has been tough as a rock all year, but there are some signs of weakness after this last quarter. Investors should take caution over the next few months and look for a lower entry point as a possible infrastructure rally helps the stock in the back half of the year.

For those interested in the building products space try Advanced Drainage Systems (WMS), which is a Zacks Rank #1 (Strong Buy)

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