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Wedbush: BMC Stock Undervalued: 'We Would Be Buyers Ahead of Q2 Results'

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Earnings Scheduled For July 30, 2018
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Building products and services company BMC Stock Holdings Inc (NASDAQ: BMCH) is a beneficiary of a strong U.S. housing market, according to an analyst at Wedbush.

The Analyst

Jay McCanless initiated coverage of shares with an Outperform rating and $27 price target.

The Thesis

Rising single-family construction, multi-family construction as well as renovation/remodel spending bode well for BMC Stock Holdings, McCanless said in a note.

The analyst said nationwide single-family housing starts rose 8.5 percent year-over-year in Q2, while multi-family starts climbed 5.1 percent, belying expectations for a negative comp.

Single- and multi-family starts make up about 85 percent of the company's revenues, the analyst said.

McCanless believes the company's guidance for a mid-single-digit percentage revenue gain from organic growth and M&A is achievable due to the rising demand.

The analyst expects the lumber price volatility to weigh on gross margin and overhead leverage in Q2, but expects the pressure to subside in the second-half, as lumber prices stabilize.

Wedbush said it's in line with the consensus adjusted earnings per share estimate of 45 cents, while it looks ahead to revenues of $1 billion compared to the $987 million consensus estimate.

Of the two issues likely to plague shares, the firm believes gross margin weakness is more serious than the lack of a CEO.

"At current levels, we view the shares as undervalued, and we would be buyers ahead of F2Q18 EPS scheduled for release on 7/30," the firm said.

Price Action

BMC Stock Holdings shares have lost about 14 percent in the year-to-date period.

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Latest Ratings for BMCH

DateFirmActionFromTo
Nov 2018BairdMaintainsNeutralNeutral
Oct 2018Stephens & Co.DowngradesOverweightEqual-Weight
Sep 2018DA DavidsonInitiates Coverage OnBuy

View More Analyst Ratings for BMCH
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