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Beacon Roofing Hits 52-Week High: What's Driving the Stock?

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Shares of Beacon Roofing Supply, Inc. (BECN - Free Report) touched a new 52-week high of $50.22 on Mar 16, before closing the day at $50.06. Shares of this distributor of roofing materials and building products have rallied on the back of the company’s upbeat first-quarter fiscal 2017 results, expected benefits from acquisitions as well as sustained demand in re-roofing activity.

The company has a market cap of $3.01 billion. Beacon Roofing’s earnings beat the Zacks Consensus Estimate in three out of the trailing four quarters, with an average positive surprise of 28.08%. The average volume of shares traded over the last three months was roughly 438K.



Beacon Roofing’s shares have outperformed the Zacks categorized Building Products-Retail/Wholesale industry in the past one year. The shares have gained 25.9% while the industry registered an increase of 11.4% in the same time frame.

Growth Drivers

Beacon Roofing’s share price has increased 12.9% since the fiscal first-quarter result announcement on Feb 2. Adjusted earnings of 44 cents was grew 7% year over year. Sales were a record $1.002 billion, up 2.6% year over year. Interestingly, this was the third consecutive quarter of sales exceeding $1 billion. The quarter marked the company’s 11th consecutive quarter of residential organic sales and the ninth straight quarter of year-over-year gross margin expansion. It was also the first quarter in which gross margin improved more than 100 basis points (bps).

For fiscal 2017, the company expects total revenue growth in the range of 3–7%, which assumes 2–5% organic and 1–2% incremental contribution from acquisitions made in fiscal 2016. EBITDA will likely be in the range of $365–$395 million, which translates to EBITDA margins of 8.6–8.9%.

Beacon Roofing Supply, Inc. Price and Consensus
 

Beacon Roofing Supply, Inc. Price and Consensus | Beacon Roofing Supply, Inc. Quote

Economic indicators suggest continued recovery for residential and commercial end markets. The housing scenario will remain favorable in 2017 with economists anticipating a low-double digit increase in single-family housing starts and a low to mid-single-digit increase in existing home sales. Housing turnover will likely be a catalyst in triggering re-roofing activity. Commercial indicators are also positive as business estimates are expected to increase in the low to mid-single digits on an inflation adjusted basis. Beacon Roofing’s growth initiatives will boost residential sales growth to levels consistent with low to mid-single digit growth targets.

Recently, Beacon Roofing acquired Acme Building Materials, Inc. to reinforce its presence in Michigan. With the addition of Acme, a distributor of residential roofing and related building products, the number of Beacon Roofing locations in Michigan has gone up to 10. Acme will strengthen Beacon Roofing’s residential and complementary business in Michigan, which is an important market for the latter.

Beacon Roofing currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the sector include Rush Enterprises, Inc. (RUSHA - Free Report) , Tech Data Corporation and Papa Murphy's Holdings, Inc. (FRSH - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rush Enterprises has delivered an average earnings surprise of 12.78% in the trailing four quarters. Tech Data and Papa Murphy's Holdings also delivered an average positive earnings surprise of 8.73% and 147.69%, respectively in the past four quarters.

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