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Builders FirstSource (BLDR) Banks On Buyouts Amid Inflation
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Builders FirstSource, Inc. (BLDR - Free Report) is benefitting from robust acquisitions and strategic digital initiatives. In 2022, the company completed six acquisitions, which added to its growth.
The above-mentioned growth drivers assisted BLDR to achieve strong fourth-quarter 2022 results. In the last reported quarter, the company’s earnings and net sales surpassed the Zacks Consensus Estimate by 35.4% and 2.8%, respectively. The results were backed by the company’s strategic acquisitions, which contributed 7.3% to net sales in 2022.
Shares of BLDR have gained 44.7% over the past six months compared with the Zacks Building Products - Retail industry’s growth of 2.1%. Earnings estimates for 2023 have moved north to $7.01 per share from $6.71 over the past 60 days, depicting analysts' optimism over the company's growth prospects.
Image Source: Zacks Investment Research
However, this supplier of building materials, manufactured components and construction services is facing risks due to inflationary pressures, high costs and supply-chain disruptions. Intense market competition is an additional headwind restricting BLDR’s growth prospects.
Let’s delve deeper and analyze the factors.
Growth Drivers
Acquisitions are important for Builders FirstSource's growth strategy to supplement its organic growth and expand extensively across vast geographic boundaries. The company’s first selective targets are those 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, the company intends to enter some of the homebuilding markets, wherein it does not currently operate.
In 2022, BLDR acquired six companies. On Oct 3, 2022, BLDR acquired Pima Door & Supply, and Sunrise Carpentry’s Arizona businesses. On Sep 1, 2022, BLDR made two acquisitions — one, it took over pro-focused lumberyards and millwork facilities in the Florida Panhandle and Alabama Coast, Fulcrum Building Group, and second, it acquired Trussway. On Jul 1, 2022, it acquired HomCo Lumber and Hardware in Flagstaff, AZ. On Jan 5, it acquired National Lumber in New England. In April 2022, it acquired Panel Truss and Valley Truss.
Builders FirstSource remains focused on investing in innovations and enhancing digital solutions for its customers. The company has been deploying Paradigm Estimate and rolling it out across its operations to provide faster and more accurate customer quotes. In early 2023, the company launched the Minimum Viable Product of its builder portal — myBLDR.com — which accelerates the ability to sell digital services to more customers. In 2022, BLDR completed more than 9,500 automated take-off estimates on customer plans (up from 4,000 estimates in 2021) across nine states. This adoption will continue to accelerate in coming years.
BLDR is increasing its investment and intends to do so to support technology and automation that will deliver operational excellence and increased sales volumes.
Headwinds
Builders FirstSource is facing supply-related challenges with respect to some of the products, including OSB, plywood, lumber and particleboard, thereby increasing the price of such products. Despite undertaking various cost-saving initiatives, the company continues to see inflationary pressures for the commodities product categories.
The product mix shifted toward lower-margin commodity products. Also, higher wages and variable compensation costs, along with high fuel-related expenses, restrict its growth trends. Being a nationwide supplier of building materials, Builders FirstSource is vulnerable to fluctuations in market prices for such commodities.
Builders FirstSource also belongs to a highly competitive industry. The maintenance, repair and operations supply market is highly fragmented, with many smaller local players competing directly on price. It faces substantial competition from local, regional and national building material chains, mostly privately held local or regional businesses.
Here are some better-ranked stocks that investors may consider in the Zacks Retail-Wholesale sector.
Tecnoglass Inc. (TGLS - Free Report) flaunts a Zacks Rank #1 at present. TGLS delivered a trailing four-quarter earnings surprise of 21.5%, on average. Shares of the company have gained 94.4% in the past six months.
The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 13.4% and 15.4%, respectively, from the year-ago period’s reported levels.
Chuy's Holdings, Inc. (CHUY - Free Report) currently sports a Zacks Rank #1. CHUY delivered a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have risen 54.4% in the past six months.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s reported levels.
Brinker International, Inc. (EAT - Free Report) currently carries a Zacks Rank #2 (Buy). EAT delivered a trailing four-quarter earnings surprise of 11.5%, on average. The stock has gained 51.7% in the past six months.
The Zacks Consensus Estimate for EAT’s fiscal 2023 sales suggests growth of 8.1% from the year-ago period’s reported level, while the same for EPS suggests a decline of 12.3%.
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Builders FirstSource (BLDR) Banks On Buyouts Amid Inflation
Builders FirstSource, Inc. (BLDR - Free Report) is benefitting from robust acquisitions and strategic digital initiatives. In 2022, the company completed six acquisitions, which added to its growth.
The above-mentioned growth drivers assisted BLDR to achieve strong fourth-quarter 2022 results. In the last reported quarter, the company’s earnings and net sales surpassed the Zacks Consensus Estimate by 35.4% and 2.8%, respectively. The results were backed by the company’s strategic acquisitions, which contributed 7.3% to net sales in 2022.
Shares of BLDR have gained 44.7% over the past six months compared with the Zacks Building Products - Retail industry’s growth of 2.1%. Earnings estimates for 2023 have moved north to $7.01 per share from $6.71 over the past 60 days, depicting analysts' optimism over the company's growth prospects.
Image Source: Zacks Investment Research
However, this supplier of building materials, manufactured components and construction services is facing risks due to inflationary pressures, high costs and supply-chain disruptions. Intense market competition is an additional headwind restricting BLDR’s growth prospects.
Let’s delve deeper and analyze the factors.
Growth Drivers
Acquisitions are important for Builders FirstSource's growth strategy to supplement its organic growth and expand extensively across vast geographic boundaries. The company’s first selective targets are those 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, the company intends to enter some of the homebuilding markets, wherein it does not currently operate.
In 2022, BLDR acquired six companies. On Oct 3, 2022, BLDR acquired Pima Door & Supply, and Sunrise Carpentry’s Arizona businesses. On Sep 1, 2022, BLDR made two acquisitions — one, it took over pro-focused lumberyards and millwork facilities in the Florida Panhandle and Alabama Coast, Fulcrum Building Group, and second, it acquired Trussway. On Jul 1, 2022, it acquired HomCo Lumber and Hardware in Flagstaff, AZ. On Jan 5, it acquired National Lumber in New England. In April 2022, it acquired Panel Truss and Valley Truss.
Builders FirstSource remains focused on investing in innovations and enhancing digital solutions for its customers. The company has been deploying Paradigm Estimate and rolling it out across its operations to provide faster and more accurate customer quotes. In early 2023, the company launched the Minimum Viable Product of its builder portal — myBLDR.com — which accelerates the ability to sell digital services to more customers. In 2022, BLDR completed more than 9,500 automated take-off estimates on customer plans (up from 4,000 estimates in 2021) across nine states. This adoption will continue to accelerate in coming years.
BLDR is increasing its investment and intends to do so to support technology and automation that will deliver operational excellence and increased sales volumes.
Headwinds
Builders FirstSource is facing supply-related challenges with respect to some of the products, including OSB, plywood, lumber and particleboard, thereby increasing the price of such products. Despite undertaking various cost-saving initiatives, the company continues to see inflationary pressures for the commodities product categories.
The product mix shifted toward lower-margin commodity products. Also, higher wages and variable compensation costs, along with high fuel-related expenses, restrict its growth trends. Being a nationwide supplier of building materials, Builders FirstSource is vulnerable to fluctuations in market prices for such commodities.
Builders FirstSource also belongs to a highly competitive industry. The maintenance, repair and operations supply market is highly fragmented, with many smaller local players competing directly on price. It faces substantial competition from local, regional and national building material chains, mostly privately held local or regional businesses.
Zacks Rank & Key Picks
BLDR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are some better-ranked stocks that investors may consider in the Zacks Retail-Wholesale sector.
Tecnoglass Inc. (TGLS - Free Report) flaunts a Zacks Rank #1 at present. TGLS delivered a trailing four-quarter earnings surprise of 21.5%, on average. Shares of the company have gained 94.4% in the past six months.
The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 13.4% and 15.4%, respectively, from the year-ago period’s reported levels.
Chuy's Holdings, Inc. (CHUY - Free Report) currently sports a Zacks Rank #1. CHUY delivered a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have risen 54.4% in the past six months.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s reported levels.
Brinker International, Inc. (EAT - Free Report) currently carries a Zacks Rank #2 (Buy). EAT delivered a trailing four-quarter earnings surprise of 11.5%, on average. The stock has gained 51.7% in the past six months.
The Zacks Consensus Estimate for EAT’s fiscal 2023 sales suggests growth of 8.1% from the year-ago period’s reported level, while the same for EPS suggests a decline of 12.3%.