Stephens Steps To Sidelines At Beacon Roofing Supply: Here's Why

Loading...
Loading...
  • Beacon Roofing Supply, Inc. BECN shares have appreciated 54.98 percent year-to-date, touching a high of $43.16 on November 27.
  • Stephens’ Trey Grooms has downgraded the rating on the company from Overweight to Equal-Weight, while raising the price target from $40 to $46.
  • Apart from additional M&A, Groom believes that there are no near-term catalysts for the stock, which seems to be fairly values at the current levels.

Analyst Trey Grooms mentioned that Beacon Roofing reported its F4Q15 EPS and EBITDA ahead of the estimates and the consensus, while year-on-year revenue growth fell short of expectations.

Gross margins beat expectations as well, growing 180 bps year-on-year to the highest level seen since F1Q12. “Inventory levels remain in check heading into the winter, and pricing looks to have stabilized for now,” Grooms stated.

For FY16, management has guided to pro forma sales ahead of the estimate, while mentioning that the range reflected low to mid-single digit contribution from both Beacon Roofing and the recently acquired RSG. The FY16 EPS guidance was also ahead of the consensus.

Grooms believes that the gross margin guidance of 23-24 percent was encouraging, since on a stand-along basis RSG was at gross margins of about 21.5 percent. “We think this reflects BECN's better pricing discipline and purchasing ability,” Grooms said.

Management also stated that Beacon Roofing has acquired more than $1.2 billion in sales via the RSG acquisition. Grooms expects synergies worth $30 million and $50 million from the acquisition in 2016 and 2017, respectively.

Loading...
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsStephensTrey Grooms
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...