Gibraltar Industries, Inc. (ROCK - Free Report) is well poised for growth, courtesy of enduring benefits from the three-pillar value creation strategy, solid backlog and improved housing market fundamentals. On the flip side, it is important to note that the recent outbreak of coronavirus in China has now become a global crisis. Any supply chain disruption arising from the outbreak may impact the company’s performance in the near term. Nonetheless, strengthening solar, greenhouse, perimeter security and infrastructure businesses remain catalysts for growth.
Shares of this building-products company have outperformed the Zacks Building Products – Miscellaneous industry and the S&P 500 so far this year. The price performance was backed by the company’s robust earnings surprise history. It surpassed the Zacks Consensus Estimate in five of the trailing seven quarters. Its revenues surpassed the consensus mark in four of the trailing seven quarters.
Earnings estimates for 2020 have moved 6% north in the past 30 days. This positive trend reflects bullish analyst sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let us discuss other factors that make this stock a profitable pick.
Strong Renewable/Conservation Markets Potential: The company remains encouraged by long-term market prospects of both Renewable Energy and Conservation businesses. U.S. solar growth has remained undeterred by solar panel tariffs. A study by the Solar Energy Industries Association and GTM Research reveals that solar energy has become a cost-effective option for most part of the United States, despite tariffs being levied on imported PV panels.
Notably, the segment’s fourth-quarter net sales increased 26.4% year over year (21.4% on an organic basis) to $111.4 million. The Apeks Supercritical acquisition contributed 5% to the top line. The uptick can be attributed to solid demand for its commercial greenhouse growing solutions, including design, structures system integration, field project management and general contracting services.
Growth Strategies: Gibraltar — which shares space with Foundation Building Materials, Inc (FBM - Free Report) , Installed Building Products, Inc (IBP - Free Report) and Simpson Manufacturing Co., Inc (SSD - Free Report) in the same industry — is progressing well operationally as well as financially on the back of its three-pillar value creation strategy. Over the past 12 months, the company migrated from a Four-Pillar strategy to a Three-Pillar Strategy with the operating foundation focused on three core tenets: Business Systems, Portfolio Management and Organizational Development.
Pillar number one involves consolidating operational excellence and innovation. Portfolio management and M&A comprise pillar number two. Portfolio management is focused not only on optimizing existing assets, but also allocating and prioritizing capital on the correct initiatives to execute plans. Third pillar, called organization development, focuses on talent development, design and structure of organization.
Superior ROE & Solid Prospects: Gibraltar’s return on equity (ROE) is indicative of growth potential. The company’s ROE of 13.1% compares favorably with the industry average of 11.5%, implying that it is efficient in using its shareholders’ funds.
Meanwhile, Gibraltar has solid prospects, as is evident from the Zacks Consensus Estimate for fiscal 2020 earnings of $3.01 per share, which indicates 16.7% year-over-year growth (higher than the industry average of 10.4%). Overall, it constitutes a great pick in terms of growth investment, supported by a Growth Score of A.
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