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TopBuild (BLD) Rises 27% in Past 3 Months Amid Inflation

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Shares of TopBuild Corp. (BLD - Free Report) have risen 26.7% over the past three months compared with the Zacks Building Products - Miscellaneous industry’s growth of 12.5%. The company’s accretive acquisitions, productivity initiatives and improved pricing attributed to its growth.

TopBuild reported impressive results for fourth-quarter 2022, wherein earnings and net sales surpassed the Zacks Consensus Estimate by 9.5% and 24%, respectively. Earnings and net sales increased 41% and 18.9% on a year-over-year basis, respectively.

Earnings estimates for 2023 have moved north to $15.62 per share from $15.19 over the past 30 days, depicting analysts' optimism over the company's growth prospects.

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However, this Zacks Rank #3 (Hold) company’s growth remains challenged by high input and labor costs, supply-related risks, softening U.S. housing market and weather conditions. These headwinds have impacted the growth prospects of BLD.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let us discuss the factors broadly.


Acquisitions are an important part of TopBuild’s growth strategy to supplement organic growth, and expand access to additional markets and products. It has already completed its first acquisition of 2023 and acquired five companies in 2022. On Jan 26, 2023, BLD acquired SRI Holdings, a residential insulation installation company. In 2022, the company acquired CV Insulation, Assured Insulating, Green Energy Solutions, Billings Insulation and Southwest Insulation. These five acquisitions are expected to generate $17.3 million in revenues annually.

In 2022, net sales of BLD increased 43.7%. The acquisitions made in 2022 contributed 24.9% of sales growth. The gross margin improved 180 basis points in 2022 from 2021 due to the productivity initiatives, higher selling prices and higher sales volume. The productivity initiatives aided the company in increasing cost efficiency and margins. The impressive margin expansion led to increased profitability, depicting a flexible operating model and its ability to quickly reduce costs.

BLD remains focused on driving top-line growth through productivity initiatives like the successful integration of DI and improving operational efficiencies. The company remains committed to its long-term outlook.


Unprecedented supply-chain disruptions, higher raw material costs and labor costs remain concerns for TopBuild. Labor shortages and material constraints are stretching the building cycle and increasing the lag time. This apart, supply chain disruptions are bothering the whole industry, including TopBuild. Although the company has been working on recovering higher commodity costs through price increases, ongoing volatility in material costs and tightened capacity remain concerns.

Considering the persistent economic condition, TopBuild expects sales between $4.7 billion and $4.9 billion, down from $5 billion reported in 2022. BLD expects adjusted EBITDA of $820-$910 million for 2023, suggesting a decline from $940.6 million reported in 2022.

Also, the reduced demand in the U.S. housing market is a major concern for BLD as it is likely to affect top-line growth. Rising interest rates and increased inflation are restricting housing demand in the market.

Another headwind to TopBuild’s business is the weather condition. The company typically realizes higher sales in the third and fourth calendar quarters, corresponding the peak season for residential new construction and residential repair/remodel activity. Sales during winter are seasonally slower due to lower construction activity.

Key Picks

Here are some top-ranked stocks that investors may consider in the Zacks Construction sector.

NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank #1. NVR has a trailing four-quarter earnings surprise of 6.9%, on average. Shares of the company have gained 31.1% in the past six months.

The Zacks Consensus Estimate for NVR’s 2023 sales and EPS indicates a decline of 7.2% and 19.7%, respectively, from the previous year’s reported levels.

United Rentals, Inc. (URI - Free Report) currently carries a Zacks Rank #2 (Buy). Shares of URI have gained 37.1% in the past six months. The long-term earnings growth rate is anticipated to be 16.3%.

The Zacks Consensus Estimate for URI’s 2023 sales and EPS indicates growth of 20.3% and 29%, respectively, from the previous year’s reported levels.

Skyline Champion Corporation (SKY - Free Report) currently carries a Zacks Rank #2. SKY has a trailing four-quarter earnings surprise of 43.2%, on average. Shares of the company have gained 33.1% in the past six months.

The Zacks Consensus Estimate for SKY’s fiscal 2024 sales and EPS indicates a decline of 11.7% and 37.9%, respectively, from the previous year’s reported levels.

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