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Builders FirstSource (BLDR) Stock on Fire: Rallies 81% YTD

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Builders FirstSource, Inc. (BLDR - Free Report) has been making the most out of the robust housing market, mergers & acquisitions, and focus on investing in innovations and enhancing digital solutions. The company’s shares have been rallying high, defying unprecedented supply-related constraints and challenges associated with the repair & remodeling or R&R market due to increased commodity costs.

Shares of this construction supply company have surged 80.6% year to date, outperforming the Zacks Building Products – Retail industry’s 49.7% rise. Earnings estimates for 2021 for this Zacks Rank #1 (Strong Buy) company have moved 31.1% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

Builders FirstSource also has a favorable VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities to investors.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve into the major driving factors.

Solid Housing Market: A Boon

Builders FirstSource has a huge range of building products. The company is a leading supplier and manufacturer of building materials, manufactured components, and construction services to professional contractors, sub-contractors, and consumers. BLDR is observing higher demand arising from solid momentum of the housing industry. Housing markets have been showing resilience of late, given low mortgage rates. With the opening of the economy, demand for housing and building material products has been improving, given the increasing trend of consumers to invest more in homes amid the pandemic. For third-quarter 2021, the company’s core organic sales increased 16.1% year over year.

Robust Inorganic Drive

Builders FirstSource remains focused on systematic acquisitions to supplement organic growth and expand extensively across vast geographic boundaries. The company remains focused on companies manufacturing prefabricated components such as factory-built roof and floor trusses, wall panels, stairs, and engineered wood as well as other value-added products such as vinyl windows and millwork. Secondly, BLDR intends to enter some of the homebuilding markets wherein it does not currently operate.

Focus on Digital Platforms

Builders FirstSource has been investing in innovations and enhancing digital solutions for customers. The company’s latest acquisition of WTS Paradigm is a testimony to the fact. On Aug 17, 2021, Builders FirstSource acquired WTS Paradigm, a software solutions and services provider for the building products industry. This acquisition is an important step toward investing in innovative digital solutions that will help BLDR provide services to customers more efficiently.

Impressive Earnings Surprise History & Earnings Growth Expectation

Builders FirstSource has a solid earnings surprise history. The company surpassed earnings estimates in the trailing seven quarters. The trend is expected to continue in the near term, courtesy of its solid third-quarter 2021 performance.

The company has solid prospects, as is evident from the Zacks Consensus Estimate for 2021 earnings of $8.22 per share, which indicates 173.1% year-over-year growth.

Upbeat View

Buoyed by the performance through 2021, the company lifted its 2021 guidance for sales and adjusted EBITDA. Builders FirstSource now expects net sales in the range of $19.3-$19.8 billion versus $18-$19 billion expected earlier. Also, it expects 51-55% year-over-year growth on a pro-forma basis compared with 41-48% projected earlier.

Adjusted EBITDA is now projected in the range of $2.85-$2.95 billion (up from the earlier expectation of $2.2-$2.4 billion). The company anticipates 166-176% growth on a year-over-year basis versus 105-124% projected earlier. It expects to realize cost savings of $90-$110 million from the BMC merger integration and free cash flow in the range of $1.8-$2 billion.

Other Top-Ranked Stocks From the Broader Retail-Wholesale Sector:

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Dave & Buster's reported better-than-expected earnings in the trailing four quarters, with the average being 201.8%. The company’s fiscal 2021 earnings are likely to witness growth of 147.7%. PLAY has gained 36.4% in the past year.

Beacon Roofing Supply, Inc. (BECN - Free Report) presently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 566.8%, on average. Shares of TACO have gained 48.5% in the past year.

The Zacks Consensus Estimate for Beacon Roofing’s sales and earnings per share for the current financial year suggests an improvement of 7.3% and 7.1%, respectively, from the year-ago period.

Kura Sushi USA, Inc. (KRUS - Free Report) currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 15.6%, on average. Shares of KRUS have gained a whopping 287.7% in the past year.

The Zacks Consensus Estimate for Kura Sushi’s sales and earnings per share for the current financial year suggests growth of 108% and 85.7%, respectively, from the year-ago period.