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Why is it Apt to Hold Gibraltar Industries (ROCK) Stock Now?

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Gibraltar Industries (ROCK - Free Report) is benefiting from its three-pillar value creation strategy, strengthening housing market and strong demand for legacy and TerraSmart businesses. Moreover, the company is benefiting from margin expansion in Residential, Renewable and Infrastructure segments.

However, rise in price of key input commodities, seasonal influence on the business and continued impact of the COVID-19 pandemic have affected the company.

Factors Driving Growth

Gibraltar’s top and bottom line increased 33.5% and 32.5% year over year, respectively. Moreover, its earnings surpassed analysts’ expectations in 10 of the trailing 15 quarters. Net sales also topped the same in seven of the last 12 quarters. Solid contribution from Residential Products and Renewable Energy segment, the TerraSmart acquisition, product and services mix, cost management, and 80/20 productivity initiatives supported the overall sales growth during first-quarter 2021.

Gibraltar is progressing well operationally as well as financially on the back of its growth strategy. Over the past 12 months, the company has migrated from a four-pillar strategy to a three-pillar strategy, with the operating foundation focused on three core tenets: Business Systems, Portfolio Management and Organizational Development. During the first quarter of 2021, the company continued to accelerate the implementation of three pillars through portfolio management initiatives, improvement of the business system and strengthening the organization.

The first pillar, i.e., Business Systems combines two of its previous strategic pillars, namely operational excellence and product innovation. The second strategic pillar comprises Portfolio Management and Acquisitions. Through this pillar, the company is focused on optimizing the business portfolio, and ensures sustainable investment of human and financial capital to provide profitable growth, while expanding customer relations and market reach. Lastly, the third pillar of the strategy is Organizational Development that primarily focuses on talent development, design and structure of organization.

The company is encouraged by the long-term market growth prospects of both Renewable Energy and Conservation businesses. During the first quarter of 2021, the segment’s net sales grew 80.8% from the year-ago level. This upside can be primarily attributed to growth in Renewable Energy and the acquisitions of TerraSmart and Sunfig businesses. This acquisition of TerraSmart contributed $37.3 million to Gibraltar's renewable revenues during the first quarter.

Also, 2.1% organic growth in the legacy business is a positive. However, these positives were partly offset by projects impacted by the pandemic-related scheduling delays, inclement weather conditions and supply chain disruptions. Meanwhile, segment backlog rose 138% year over year owing to strong demand at both legacy and TerraSmart businesses.

Concern

Shares of Gibraltar have gained 10.3% compared with the Zacks Building Products - Miscellaneous industry’s 17.3% rise so far this year. This underperformance is mainly due to the continued impact of COVID-19 pandemic.

During the first quarter of 2021, the company’s Agtech segment revenues fell 5.1% due to the impact of supply chain-related challenges during the pandemic. Also, Infrastructure segment revenues decreased 2.6%, primarily due to pandemic-related delays in existing and new project schedules.

Also, the company had to face challenges regarding the supply of raw materials as well as logistic management. Cost of production remained high throughout the year owing to the increase in some key commodity prices. This may exert pressure on the company’s upcoming quarters as well.

 


Zacks Rank

Gibraltar — which shares space with Armstrong World Industries, Inc. (AWI - Free Report) , Construction Partners, Inc. (ROAD - Free Report) and Installed Building Products, Inc. (IBP - Free Report) in the Zacks Building Products - Miscellaneous industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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