Gibraltar Industries, Inc. (ROCK Quick QuoteROCK - Free Report) is riding high on strong performance of the Infrastructure segment and value creation strategies.

Gibraltar’s first-quarter 2023 earnings and sales surpassed the Zacks Consensus Estimate by 12.9% and 1.4%, respectively. Also, the bottom line grew 16.7% year over year. The uptrend was backed by strong contributions from the Renewables, Agtech and Infrastructure segments.

Shares of ROCK have rallied 44.9% in the past year, outperforming the Zacks Building Products - Miscellaneous industry’s growth of 37%. Earnings estimates for 2023 have moved north to $3.56 per share from $3.55 per share over the past 60 days. This depicts analysts' optimism over the company’s growth prospects. Solidifying this prospect, the company has a strong VGM Score of A, backed by a Value Score of B and a Growth Score of A.

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However, this manufacturer and distributor of building products has been facing headwinds in the form of supply chain risks, project delays as well as inflation and seasonal fluctuations.

Let us delve deeper into the factors.

Factors Favoring ROCK

Gibraltar is strongly focused on its Three-Pillar Strategy — Business Systems, Portfolio Management and Organizational Development. The company continues to accelerate the implementation of three pillars through portfolio management initiatives, improvement of the business system and strengthening the organization. In first-quarter 2023, the company’s overall growth was attributed to material cost alignment, field operations efficiency, price management, business mix, 80/20 initiatives and the share repurchase program.

Gibraltar’s Infrastructure segment is gaining traction on impressive growth trends. In first-quarter 2023, the segment’s net sales grew 8.7% to $18.7 million and backlog increased 38% year over year. The result was backed by increased infrastructure spending and continuous market participation efforts. The adjusted operating margin and adjusted EBITDA margin increased 800 basis points (bps) and 760 bps, year over year, respectively.

Also, the solid potential of Renewables and Agtech segments is encouraging for ROCK’s top-line growth. In the first quarter of 2023, the backlog of the Residential segment increased 34% sequentially. The company expects the year-over-year backlog to be positive through 2023. Also, a strong project pipeline driven by produce and cannabis projects is expected to increase the backlog of the Agtech segment in the upcoming quarters.

Factors Impeding Growth

Gibraltar has been facing supply chain issues over the last few quarters. It continues to witness material and labor supply-related challenges. In the first quarter of 2023, the company continued to witness project delays and disrupted solar project schedules. The company is still dealing with panel supply issues in the U.S. solar industry, as 80% of the key materials and components for panels are produced in China. The trend is likely to be the same for 2023.

Also, an increase in raw material costs is a growing concern for Gibraltar. During 2022, the company witnessed higher costs related to labor and material and the same continues in 2023. In the first quarter of 2023, the Residential segment’s adjusted operating margin and EBITDA margin declined 230 basis points (bps) and 190 bps, respectively due to increased prices and material costs, persisting alignment of price and material cost and resumption of normal seasonal demand pattern.

Seasonal influences affect the company’s demand patterns, with lower sales typically in the first and fourth quarters due to reduced activity in the building industry owing to inclement weather.

Zacks Rank & Key Picks

Gibraltar currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks that investors may consider from the Construction sector are Martin Marietta Materials, Inc. (MLM Quick QuoteMLM - Free Report) , Vulcan Materials Company (VMC Quick QuoteVMC - Free Report) and Watsco, Inc. (WSO Quick QuoteWSO - Free Report) .

Martin Marietta currently sports a Zacks Rank #1 (Strong Buy). MLM delivered a trailing four-quarter earnings surprise of 31%, on average. Shares of the company have rallied 26.2% in the year-to-date period. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MLM’s 2023 sales and EPS indicates growth of 19% and 33.1%, respectively, from the previous year’s reported levels.

Vulcan Materials currently sports a Zacks Rank #1. VMC has a trailing four-quarter earnings surprise of 7.1%, on average. Shares of the company have risen 18.4% in the year-to-date period.

The Zacks Consensus Estimate for VMC’s 2023 sales and EPS indicates growth of 5.9% and 27.6%, respectively, from the previous year’s reported levels.

Watsco currently carries a Zacks Rank #2 (Buy). WSO delivered a trailing four-quarter earnings surprise of 5.3%, on average. Shares of the company have rallied 47% in the year-to-date period.

The Zacks Consensus Estimate for WSO’s 2023 sales and EPS indicates growth of 3.1% and 2.2%, respectively, from the previous year’s reported levels.