Shares of NCI Building Systems Inc.
(NCS - Free Report
) have been performing well of late driven by upbeat outlook, focus on growth strategy around insulated metal panels (IMP), along with investments in automation and process innovation.
This Zacks Rank #2 (Buy) stock has a VGM Score
of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best upside potential.
The company is one of the major integrated manufacturers of metal products for the North American non-residential construction industry with a market capitalization of $1.29 billion. Additionally, the stock carries a long-term earnings growth rate of 10%. NCI Building has outperformed the industry
it belongs to in the past three months. The stock gained 19.0%, significantly outpacing the industry's growth of 12.6%.
If you haven't taken advantage of the share price appreciation yet, the time is right for you to add the stock as NCI Building looks promising and is poised to carry the momentum ahead.
Strong Fiscal 2017 Results
NCI Building delivered adjusted earnings of 32 cents per share for fourth-quarter fiscal 2017 (ended Oct 29, 2017) that beat the Zacks Consensus Estimate of 31 cents. Earnings were up 14% year over year despite job-site disruptions, uneven production flow and elevated transportation costs related to the various hurricanes. For fiscal 2017, NCI Building reported adjusted earnings of 80 cents per share in fiscal 2017, up 13% year over year.
For the fiscal first quarter 2018, NCI Building estimates revenues to be in the range of $390-$410 million and adjusted EBITDA to be in the $24-$34 million range. It expects gross margins to improve in fiscal 2018 year due to improvements in cost structure. The company remains confident that fiscal 2018 will be a better year than fiscal 2017. It is poised to gain from success in leveraging IMP product sales to the Components and Building groups. NCI Building projects business to improve over the next 12-18 months.
Positive Earnings Surprise History
NCI Building has outpaced the Zacks Consensus Estimate in three of the four trailing quarters. The company has delivered an average positive earnings surprise of 9.74%.
Estimates Northward Bound
The Zacks Consensus Estimate for NCI Building has moved north 2% to $1.07 for fiscal 2018 and for fiscal 2019, the estimate has moved up 5% to $1.369.
Healthy Growth Expectations
The Zacks Consensus Estimate for fiscal 2018 is at $1.07, reflecting 33.8% year-over-year growth. The Zacks Consensus Estimate for fiscal 2019 is pegged at $1.39, reflecting year-over-year growth of 29.9%.
Growth Drivers Intact
A look at the company's revenue performance in the past five years depicts a clear upward trend. The momentum will continue to be driven by growth in construction, acquisitions and backlog growth. Further, the company will also benefit from its focus on expanding the IMP products, which given their several physical and cost-effective attributes, such as energy efficiency, are considered compelling alternatives to competing building materials. Further, the adoption of stricter standards and codes by numerous states in the United States are anticipated to lead to higher demand for IMP products in construction projects. Given these factors, growth within the IMP market will continue to outpace the broader metal building sector and the non-residential construction industry as a whole.
NCI Building's earnings performance has also been impressive in the past five years. The company continues to execute on its plans to improve cost efficiency through the optimization of its combined manufacturing plant footprint and the elimination of certain fixed and indirect costs. Investments in automation and process innovation which will slash operating costs, improve margins, quality and service, and enhance long-term operational flexibility.
Stock is Undervalued
NCI Building has a EV/EBITDA of 10.51, compared with the industry average of 25.9. Based on this ratio, the stock seems undervalued.
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