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TopBuild (BLD) on Acquisition Spree, Buys Insulating Products

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TopBuild Corp. (BLD - Free Report) completed the acquisition of Insulating Products, Inc., a residential and light commercial insulation distribution company.

Insulating Products, which is headquartered in Lewisville, TX, has in facilities in Houston, San Antonio, Oklahoma City and Wichita. The company generated nearly $11 million in revenues for the trailing 12 months ended Sep 30, 2021.

Robert Buck, president and CEO of TopBuild, stated, “Insulating Products will enhance the strength of our specialty distribution business as it brings a strong and long-standing customer base and expands our geographic presence in the high growth Southwest region.”

Acquisitions Driving Growth

Acquisitions are an important part of TopBuild’s growth strategy to supplement its organic growth and expand access to additional markets and products. In 2021 (as of Nov 9, 2021), TopBuild completed 10 acquisitions, which are expected to generate $1 billion of annual revenues. On Nov 9, 2021, TopBuild acquired St. George, UT-based Tonks Insulation and Pueblo, Colorado-based Shepherds Insulation.

On Oct 18, 2021, the company acquired Distribution International or DI from Advent International in an all-cash transaction valued at $1 billion. The buyout has expanded TopBuild's footprint and increased penetration within key markets, including the recurring MRO business. In the same month, the company acquired California Building Products, a residential and light commercial insulation company serving Bakersfield, Modesto and Fresno, CA.

The Zacks Rank #2 (Buy) company has a strong pipeline of prospective acquisitions, which primarily focus on the insulation business. In June 2021, the company completed the acquisition of RJ Insulation that is expected to generate nearly $4 million in annual revenues.

Apart from the acquisitions, the company plans to close some low-margin businesses to focus on its core areas to accelerate growth and boost shareholders’ value.

Price Performance

Shares of TopBuild have increased 42.3% in the past six months compared with the industry's 6.6% rally. This installer and distributor of insulation and other building products has been banking on strategic acquisitions, strong Insulation Installation business and strong repair and remodeling activities. Also, solid prospects across the business and operational efficiencies are likely to help the company drive growth.

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Beazer Homes has gained 46% in the past year. Earnings are expected to grow 23.7% in fiscal 2022.

Quanta Services, Inc. (PWR - Free Report) currently sports a Zacks Rank #2 (Buy). Based in Houston, TX, Quanta is gaining from a three-pronged growth strategy that focuses on the timely delivery of projects to exceed customer expectations, leverage on core business to expand in complementary adjacent service lines and continue exploring new service lines. Overall, the company’s engineering and project management capabilities enable it to capitalize on market trends that are currently skewed toward engineering, procurement and construction or EPC model.

Quanta has gained 45.1% in the past year. Earnings are expected to grow 28.3% in 2022.

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United Rentals’ shares have gained 28.8% in the past year. Earnings are expected to grow 21.3% in 2022.