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Here's Why You Should Buy Beacon (BECN) Stock Right Now

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Beacon Roofing Supply, Inc. (BECN - Free Report) has been gaining strength from solid residential backdrop, digital platform and cash flow. Increased focus on the e-commerce platform, new OTC (On-Time and Complete) Delivery Network and a newly-designed website are other positives.

This largest distributor of residential and non-residential roofing materials, which belongs to the Zacks Building Products - Retail industry, has been performing pretty well of late. Its shares have gained 68% in the past six months, outperforming the industry’s rally of 15%.

Moreover, earnings estimates for fiscal 2021 have moved 20.7% upward over the past 60 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Major Growth Drivers

Favorable Housing Backdrop: Declining mortgage rates have been driving the U.S. housing industry in recent times. Overall, the U.S. housing market seems to be back on track, defying headwinds like low inventory levels, tight lending conditions, and broad-based economic as well as public health risks associated with the pandemic. Revival of housing demand has been a boon for Beacon and other companies like Construction Partners, Inc. (ROAD - Free Report) , Gibraltar Industries Inc. (ROCK - Free Report) and Installed Building Products, Inc. (IBP - Free Report) . While Construction Partners sports a Zacks Rank #1, Gibraltar and Installed Building carry a Zacks Rank #2, at present.

Furthermore, work-from-home and stay-at-home orders amid the COVID-19 pandemic have encouraged consumers to take on home improvement projects.

Strategic Review & Digital Push: In January 2020, the company undertook a strategic review decision. Under this, it integrated 40 brands across the United States and Canada that sell exterior products under Beacon Building Products. The new name reflects its ability to supply customers with a broad range of residential and commercial building products, along with a unique service offering across North America.

The company is focused on improving sales and operating performance at exterior and interior branches, as well as intends to enhance overall customer experience with increased scope and scale of business. With this strategic action, its customers are likely to benefit from the industry’s best e-commerce platform, a new OTC (On-Time and Complete) Delivery Network and a newly-designed website. Markedly, the OTC Network is developed to support in-store and online customers with enhanced product availability, delivery tracking, along with notification.

The company will also gain from successful execution of the technology initiative in the growing e-commerce platform. The digital platform achieved 10% of the company’s sales during fiscal 2020. It remains on track with the long-term target of generating $1 billion annual digital sales. The company continues to enhance the platform and add capabilities based on customer feedback. Given lower cost to service, digital sales are generally accretive to gross margin.

Enough Liquidity to Overcome Coronavirus Woes: Beacon has been maintaining a strong liquidity position to navigate through the current challenging environment. The company ended the fiscal fourth quarter with a solid liquidity, including $625 million cash and cash equivalents along with $955 million under asset-based revolving lines of credit.

Long-term debt obligations totaled $2.7 billion, down from $3.3 billion at fiscal third quarter-end. Evidently, total debt to total capital at quarter-end decreased to 56.1% from 61.7% at the end of the previous quarter. Notably, the company has no significant debt maturity until 2023.

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