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Builders FirstSource (BLDR) Rallies on Solid Long-Term Goals

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Builders FirstSource, Inc.’s (BLDR - Free Report) shares increased 3.57% during the trading session on Dec 7 and 1.3% in the after-hour trading session, after the company provided an optimistic long-term outlook.

During the investor day, the company initiated its guidance for 2021 through 2025. Per the same, BLDR's base business targets include 10% net sales compounded annual growth rate, 15% adjusted EBITDA CAGR and 30% adjusted EPS CAGR driven by 50 basis points (bps) annual expansion in adjusted EBITDA margin.

The company’s revenues are expected to grow, given improved market share gains, acquisitions, low- to mid-single digit market growth, digital ramp up and value-added products expansion.

Builders FirstSource also expects its market share to grow 100-300 bps faster than the overall building supplier market. Additionally, the company intends to deploy capital of $7-$10 billion during that period.

Zacks Investment ResearchImage Source: Zacks Investment Research

Major Driving Factors

Shares of this construction supply company have surged 86.3% year to date, outperforming the Zacks Building Products – Retail industry’s 50% rise. Earnings estimates for 2021 for this Zacks Rank #1 (Strong Buy) company have moved 12.3% upward over the past seven 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 A. 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.

The company is benefiting from its focus on cost synergies, strategic acquisitions, and robust demand arising from solid housing and repair & remodeling (R&R) activities. During third-quarter 2021, the company’s core organic sales increased 16.1% on robust demand for single-family housing, R&R and other activities.

Furthermore, 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.

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

GMS Inc. (GMS - Free Report) presently has a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.9%, on average. Shares of BECN have gained 98.7% YTD.

The Zacks Consensus Estimate for GMS’ sales and earnings per share for the current financial year suggests an improvement of 25.6% and 59.6%, respectively, from the year-ago period.

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 BECN have gained 37.1% YTD.

The Zacks Consensus Estimate for Beacon Roofing’s sales and earnings per share for the current financial year suggests an improvement of 6.7% and 7.8%, respectively, from the year-ago period.

Fastenal Company (FAST - Free Report) — which has been benefiting from strong demand for manufacturing and construction equipment as well as supplies — holds a Zacks Rank #2.

Fastenal reported better-than-expected earnings in the trailing four quarters, with the average being 1.98%. The company’s 2021 earnings are likely to witness growth of 5.4%. FAST has gained 29.5% YTD.