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Here's Why You Should Hold Gibraltar Industries (ROCK) Now
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Gibraltar Industries (ROCK - Free Report) is benefiting from its three-pillar value creation strategy, strong housing market and solid demand for legacy and TerraSmart businesses.
However, a continuous rise in the price of key input commodities and seasonal influence on the business have affected the company. Meanwhile, shares of Gibraltar have gained 10.4% compared with the Zacks Building Products - Miscellaneous industry’s 25.3% rise over the past year.
Solid contribution from all the business segment, the TerraSmart acquisition, product and services mix, cost management, and 80/20 productivity initiatives supported the overall sales growth during second-quarter 2021. During the second quarter, Gibraltar’s sales and earnings increased 36.5% and 6.7% year over year, respectively. Moreover, its earnings surpassed analysts’ expectations in nine of the trailing 15 quarters. Net sales also topped the same in eight of the last 12 quarters.
Solid Contribution From Renewable Business Prospects
The company is encouraged by the long-term market growth prospects of both Renewable Energy and Conservation businesses. During the second quarter of 2021, the segment’s net sales grew 92.5% from the year-ago level. Notably, the upside can be primarily attributed to growth in Renewable Energy and the acquisitions of TerraSmart and Sunfig businesses. This acquisition of TerraSmart contributed 25% to Gibraltar's renewable revenues during the second quarter of 2021. Also, 4% organic growth in the legacy business added to the positives. Meanwhile, segment backlog rose 54% year over year owing to strong demand at both legacy and TerraSmart businesses. Further, it expects the processing market to see positive results and margin expansion through 2021. Strong demand from both domestic renewable energy and conservation markets along with continued traction of innovative products are likely to fuel growth for the company.
Thee-Pillar Strategy
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 same industry — is progressing well operationally as well as financially on the back of its three-pillar growth strategy. The strategy is focused on three core tenets: Business Systems, Portfolio Management and Organizational Development. During the second 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 its business portfolio. During second-quarter 2021, the company’s 22.5% growth was mainly attributable to the recent acquisitions of Architectural Mailboxes, Sunfig and TerraSmart. Lastly, the third pillar of the strategy is Organizational Development. The Organizational Development primarily focuses on talent development, design and structure of organization.
Superior ROE
Gibraltar’s superior return on equity (ROE) is also indicative of its growth potential. The company’s ROE currently stands at 14.6%. This compares favorably with the negative ROE of 23.7% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and Gibraltar’s ability to generate profit with minimum capital usage.
Image Source: Zacks Investment Research
Concerns
Although sales across all business segments increased during the second quarter, the company continues to witness labor-supply related challenges and other COVID-associated woes.
During the second quarter of 2021, the company continued to witness higher costs related to labor and material. Also, the company had to face challenges regarding the supply of raw materials as well as logistic management. Notably, the company expects these issues to continue for the balance of 2021.
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Here's Why You Should Hold Gibraltar Industries (ROCK) Now
Gibraltar Industries (ROCK - Free Report) is benefiting from its three-pillar value creation strategy, strong housing market and solid demand for legacy and TerraSmart businesses.
However, a continuous rise in the price of key input commodities and seasonal influence on the business have affected the company. Meanwhile, shares of Gibraltar have gained 10.4% compared with the Zacks Building Products - Miscellaneous industry’s 25.3% rise over the past year.
Let’s take a look at the factors supporting growth of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Major Factors Driving Growth
Steller Q2 Performance
Solid contribution from all the business segment, the TerraSmart acquisition, product and services mix, cost management, and 80/20 productivity initiatives supported the overall sales growth during second-quarter 2021. During the second quarter, Gibraltar’s sales and earnings increased 36.5% and 6.7% year over year, respectively. Moreover, its earnings surpassed analysts’ expectations in nine of the trailing 15 quarters. Net sales also topped the same in eight of the last 12 quarters.
Solid Contribution From Renewable Business Prospects
The company is encouraged by the long-term market growth prospects of both Renewable Energy and Conservation businesses. During the second quarter of 2021, the segment’s net sales grew 92.5% from the year-ago level. Notably, the upside can be primarily attributed to growth in Renewable Energy and the acquisitions of TerraSmart and Sunfig businesses. This acquisition of TerraSmart contributed 25% to Gibraltar's renewable revenues during the second quarter of 2021. Also, 4% organic growth in the legacy business added to the positives. Meanwhile, segment backlog rose 54% year over year owing to strong demand at both legacy and TerraSmart businesses. Further, it expects the processing market to see positive results and margin expansion through 2021. Strong demand from both domestic renewable energy and conservation markets along with continued traction of innovative products are likely to fuel growth for the company.
Thee-Pillar Strategy
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 same industry — is progressing well operationally as well as financially on the back of its three-pillar growth strategy. The strategy is focused on three core tenets: Business Systems, Portfolio Management and Organizational Development. During the second 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 its business portfolio. During second-quarter 2021, the company’s 22.5% growth was mainly attributable to the recent acquisitions of Architectural Mailboxes, Sunfig and TerraSmart. Lastly, the third pillar of the strategy is Organizational Development. The Organizational Development primarily focuses on talent development, design and structure of organization.
Superior ROE
Gibraltar’s superior return on equity (ROE) is also indicative of its growth potential. The company’s ROE currently stands at 14.6%. This compares favorably with the negative ROE of 23.7% for the industry it belongs to. This indicates efficiency in using its shareholders’ funds and Gibraltar’s ability to generate profit with minimum capital usage.
Image Source: Zacks Investment Research
Concerns
Although sales across all business segments increased during the second quarter, the company continues to witness labor-supply related challenges and other COVID-associated woes.
During the second quarter of 2021, the company continued to witness higher costs related to labor and material. Also, the company had to face challenges regarding the supply of raw materials as well as logistic management. Notably, the company expects these issues to continue for the balance of 2021.