We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
TopBuild (BLD) Banks on Acquisitions Amid Supply Headwinds
Read MoreHide Full Article
TopBuild Corp.’s (BLD - Free Report) expansion across multiple geographies, products and end markets via strategic acquisitions has been acting as a major tailwind for growth. Also, robust construction activities in the United States have been a boon for this leading installer and specialty distributor of insulation and building material products.
Shares of TopBuild have gained 11.6% over a year, outperforming the Zacks Building Products – Miscellaneous industry’s 8.7% decline. Earnings estimates for 2022 have moved 2.9% higher over the past seven days, depicting analysts’ optimism over the company’s prospects. The earnings projection calls for 28.2% year-over-year growth for 2022.
TopBuild follows a systematic acquisition strategy to supplement organic growth and expand access to additional markets as well as products. In 2021, TopBuild completed 11 acquisitions, which generated more than $1 billion of annual revenues. On Feb 7, 2022, TopBuild Billings acquired a residential insulation installer serving the Montana and Northern Wyoming markets — Insulation. On Jan 6, 2022, TopBuild took over Insulating Products, Inc., a residential and light commercial insulation distribution company headquartered in Lewisville, TX, with additional facilities in Houston, San Antonio, Oklahoma City and Wichita.
Consistent Performance
TopBuild has been registering solid earnings and revenue growth over the last few quarters. For 2021, the company’s sales increased 28.3%, adjusted earnings per share grew 49%, adjusted gross margin expanded 90 basis points (bps) to 28.4% and adjusted EBITDA margin rose 130 bps from the prior-year period. The impressive margin expansion led to increased profitability, depicting a flexible operating model and its ability to quickly reduce costs. The impressive performance was backed by higher sales volume and solid contributions from acquisitions and pricing at both businesses, defying the labor and material constrained market.
Precisely, the Installation segment — accounting for 68% of total 2021 net sales — installs insulation and other building products through the TruTeam contractor services business, which had nearly 235 branches as of Dec 31, 2021. The segment’s revenues grew 22.4% year over year for 2021. During the year, TruTeam’s adjusted operating margin improved 90 bps to 16.2%. The segment has been benefiting from volume growth, revenues from the recent acquisitions and a richer mix of single-family homes.
Solid Construction Activities
The demand for insulation products and services is dependent on new single-family residential and multi-family home construction, commercial and industrial construction, and residential remodel and repair activity. Also, commercial and industrial maintenance and repair, and the growing need for more energy-efficient homes, commercial structures, and industrial plants have added to the bliss. Rising housing demand has been a boon for TopBuild. Working from home or stay-at-home orders amid the COVID-19 pandemic have encouraged consumers to take on more "do-it-yourself" and other home improvement projects. So, industry participants have been gaining strength from a sharp rise in housing and repair and remodeling activity.
Headwinds
Continuous supply-chain disruptions along with higher raw material and labor costs remain concerns for TopBuild. Labor shortages and material constraints are stretching the building cycle and increasing the lag time.
The cost of fiberglass has increased frequently in recent times. Although the company has been working to recover higher commodity costs through price increases, the ongoing volatility in material costs and a tightened capacity remain concerns.
Some Better-Ranked Stocks in the Construction Sector
James Hardie Industries plc (JHX - Free Report) currently sports a Zacks Rank #1. JHX’s shares have gained 4.9% in the past year against the industry’s 6.6% decline.
James Hardie’s earnings are expected to rise 37.9% in fiscal 2022.
Simpson Manufacturing Co., Inc. (SSD - Free Report) currently carries a Zacks Rank #1. The company’s shares have increased 19% in the past year.
Simpson Manufacturing’s earnings for 2022 are expected to rise 5.9%.
Owens Corning (OC - Free Report) currently carries a Zacks Rank #2 (Buy). The company’s shares have gained 7.6% in the past year.
Earnings for Owens Corning are expected to increase 11.7% in 2022.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
TopBuild (BLD) Banks on Acquisitions Amid Supply Headwinds
TopBuild Corp.’s (BLD - Free Report) expansion across multiple geographies, products and end markets via strategic acquisitions has been acting as a major tailwind for growth. Also, robust construction activities in the United States have been a boon for this leading installer and specialty distributor of insulation and building material products.
Shares of TopBuild have gained 11.6% over a year, outperforming the Zacks Building Products – Miscellaneous industry’s 8.7% decline. Earnings estimates for 2022 have moved 2.9% higher over the past seven days, depicting analysts’ optimism over the company’s prospects. The earnings projection calls for 28.2% year-over-year growth for 2022.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors supporting this Zacks Rank #3 (Hold) company’s growth trajectory. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Acquisitions
TopBuild follows a systematic acquisition strategy to supplement organic growth and expand access to additional markets as well as products. In 2021, TopBuild completed 11 acquisitions, which generated more than $1 billion of annual revenues. On Feb 7, 2022, TopBuild Billings acquired a residential insulation installer serving the Montana and Northern Wyoming markets — Insulation. On Jan 6, 2022, TopBuild took over Insulating Products, Inc., a residential and light commercial insulation distribution company headquartered in Lewisville, TX, with additional facilities in Houston, San Antonio, Oklahoma City and Wichita.
Consistent Performance
TopBuild has been registering solid earnings and revenue growth over the last few quarters. For 2021, the company’s sales increased 28.3%, adjusted earnings per share grew 49%, adjusted gross margin expanded 90 basis points (bps) to 28.4% and adjusted EBITDA margin rose 130 bps from the prior-year period. The impressive margin expansion led to increased profitability, depicting a flexible operating model and its ability to quickly reduce costs. The impressive performance was backed by higher sales volume and solid contributions from acquisitions and pricing at both businesses, defying the labor and material constrained market.
Precisely, the Installation segment — accounting for 68% of total 2021 net sales — installs insulation and other building products through the TruTeam contractor services business, which had nearly 235 branches as of Dec 31, 2021. The segment’s revenues grew 22.4% year over year for 2021. During the year, TruTeam’s adjusted operating margin improved 90 bps to 16.2%. The segment has been benefiting from volume growth, revenues from the recent acquisitions and a richer mix of single-family homes.
Solid Construction Activities
The demand for insulation products and services is dependent on new single-family residential and multi-family home construction, commercial and industrial construction, and residential remodel and repair activity. Also, commercial and industrial maintenance and repair, and the growing need for more energy-efficient homes, commercial structures, and industrial plants have added to the bliss. Rising housing demand has been a boon for TopBuild. Working from home or stay-at-home orders amid the COVID-19 pandemic have encouraged consumers to take on more "do-it-yourself" and other home improvement projects. So, industry participants have been gaining strength from a sharp rise in housing and repair and remodeling activity.
Headwinds
Continuous supply-chain disruptions along with higher raw material and labor costs remain concerns for TopBuild. Labor shortages and material constraints are stretching the building cycle and increasing the lag time.
The cost of fiberglass has increased frequently in recent times. Although the company has been working to recover higher commodity costs through price increases, the ongoing volatility in material costs and a tightened capacity remain concerns.
Some Better-Ranked Stocks in the Construction Sector
James Hardie Industries plc (JHX - Free Report) currently sports a Zacks Rank #1. JHX’s shares have gained 4.9% in the past year against the industry’s 6.6% decline.
James Hardie’s earnings are expected to rise 37.9% in fiscal 2022.
Simpson Manufacturing Co., Inc. (SSD - Free Report) currently carries a Zacks Rank #1. The company’s shares have increased 19% in the past year.
Simpson Manufacturing’s earnings for 2022 are expected to rise 5.9%.
Owens Corning (OC - Free Report) currently carries a Zacks Rank #2 (Buy). The company’s shares have gained 7.6% in the past year.
Earnings for Owens Corning are expected to increase 11.7% in 2022.