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TopBuild (BLD) Upgraded to Strong Buy on Solid Prospects
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On Apr 12, TopBuild Corp. (BLD - Free Report) was upgraded to a Zacks Rank #1 (Strong Buy). TopBuild, a leading installer and distributor of insulation products to the U.S. construction industry, has strong chances of outperforming the broader market as per the Zacks model.
TopBuild’s stock looks promising at the moment. The company’s shares have returned 30.3% year to date, faring a lot better than the 5.3% growth recorded by the Zacks categorized Building & Construction Products – Miscellaneous industry.
Why the Upgrade?
Market sentiments have been favoring TopBuild for quite some time now. The company ended fiscal 2016 on a strong note with better operating leverage that supported fiscal fourth-quarter earnings beat. Overall, it posted strong results in fiscal 2016 attributable to 7.8% revenue growth, 10.5% commercial sales growth along with 160 basis points (bps) operating margin improvement, and finally earnings per share growth of 47.4%.
Accretive or strategic acquisitions remain topmost priority for the company in order to boost market penetration while focusing on regions with outsized growth prospects. Last month, the company took over Capital Insulation, a residential insulation company based in Sacramento, California.
Again, in January, TopBuild acquired Midwest Fireproofing, a heavy commercial fireproofing and insulation company with locations in Chicago and Indianapolis. In 2016, Midwest Fireproofing generated revenues of approximately $20 million.
The company remains optimistic about fiscal 2017 with solid installation, given impressive expected housing starts. Housing/homebuilding industry has been riding high lately on solid new home sales data, affordable interest/mortgage rates and impressive housing starts figure. The latest Commerce Department report revealed that construction spending rose at a seasonally adjusted 0.8% to $1,192.8 billion in February, the highest since Apr 2006. Although it lagged expectations of a 1% gain, the start to the year turned out to be stronger than expected. All these are providing much impetus for the optimism surrounding the construction sector as a whole.
Investors seem to be optimistic about TopBuild’s future prospects, as evident from positive revisions in earnings estimates for the stock. In the last 60 days, the Zacks Consensus Estimate for the company increased 4.2% to $2.47 for fiscal 2017 and 2.1% to $2.87 for fiscal 2018. Earnings are expected to witness 25.9% growth in fiscal 2017 and 16.5% in the next fiscal.
TopBuild, which spun-off from Masco Corporation (MAS - Free Report) in 2015, has successfully surpassed the analysts’ expectations in three of the last four quarters, with an average positive earnings surprise of 27.38%.
Further, it sports a VGM Score of “B” which when combined with the Zacks Rank #1, offer the best upside potential.
NCI Building Systems expects 38% earnings growth in the current year, while United Rentals is likely to witness 8.2% earnings growth.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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TopBuild (BLD) Upgraded to Strong Buy on Solid Prospects
On Apr 12, TopBuild Corp. (BLD - Free Report) was upgraded to a Zacks Rank #1 (Strong Buy). TopBuild, a leading installer and distributor of insulation products to the U.S. construction industry, has strong chances of outperforming the broader market as per the Zacks model.
TopBuild’s stock looks promising at the moment. The company’s shares have returned 30.3% year to date, faring a lot better than the 5.3% growth recorded by the Zacks categorized Building & Construction Products – Miscellaneous industry.
Why the Upgrade?
Market sentiments have been favoring TopBuild for quite some time now. The company ended fiscal 2016 on a strong note with better operating leverage that supported fiscal fourth-quarter earnings beat. Overall, it posted strong results in fiscal 2016 attributable to 7.8% revenue growth, 10.5% commercial sales growth along with 160 basis points (bps) operating margin improvement, and finally earnings per share growth of 47.4%.
Accretive or strategic acquisitions remain topmost priority for the company in order to boost market penetration while focusing on regions with outsized growth prospects. Last month, the company took over Capital Insulation, a residential insulation company based in Sacramento, California.
Again, in January, TopBuild acquired Midwest Fireproofing, a heavy commercial fireproofing and insulation company with locations in Chicago and Indianapolis. In 2016, Midwest Fireproofing generated revenues of approximately $20 million.
The company remains optimistic about fiscal 2017 with solid installation, given impressive expected housing starts. Housing/homebuilding industry has been riding high lately on solid new home sales data, affordable interest/mortgage rates and impressive housing starts figure. The latest Commerce Department report revealed that construction spending rose at a seasonally adjusted 0.8% to $1,192.8 billion in February, the highest since Apr 2006. Although it lagged expectations of a 1% gain, the start to the year turned out to be stronger than expected. All these are providing much impetus for the optimism surrounding the construction sector as a whole.
Investors seem to be optimistic about TopBuild’s future prospects, as evident from positive revisions in earnings estimates for the stock. In the last 60 days, the Zacks Consensus Estimate for the company increased 4.2% to $2.47 for fiscal 2017 and 2.1% to $2.87 for fiscal 2018. Earnings are expected to witness 25.9% growth in fiscal 2017 and 16.5% in the next fiscal.
TopBuild, which spun-off from Masco Corporation (MAS - Free Report) in 2015, has successfully surpassed the analysts’ expectations in three of the last four quarters, with an average positive earnings surprise of 27.38%.
Further, it sports a VGM Score of “B” which when combined with the Zacks Rank #1, offer the best upside potential.
Other Stocks to Consider
Other stocks worth considering in the same space are NCI Building Systems, Inc. and United rentals Inc. (URI - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NCI Building Systems expects 38% earnings growth in the current year, while United Rentals is likely to witness 8.2% earnings growth.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>