Bad Weather Dampens Outlook For Beacon Roofing

Investors in the nation’s second biggest roofing distributor were in a cloudy mood Tuesday after Beacon Roofing Supply Inc. BECN said bad weather would hurt its near-term bottom line.

Analysts, however, weren’t letting a little foul weather affect their long-term outlooks, keeping ratings in placem — though two research lowered earnings estimates in the wake of the company's report. 

What Happened

After the market closed on Monday, Beacon pre-released its expected fiscal second-quarter results to a range that was below the Street consensus, saying heavy rain in California and Northwestern snow, along with record Midwest cold, affected as many as 75 percent of the company’s selling days over the first 55 days of the quarter. Beacon claims about 20 percent of the roofing distribution market in the nation.

The Analysts

Raymond James analyst Sam Darkatsh reiterated an Outperform rating on Beacon and maintained a $45 price target, while cutting the second-quarter EPS estimate from a 30-cent loss to a 55-cent loss.

Buckingham Research Group analyst Megan McGrath maintained a Neutral rating, lowered the price target from $38 to $31 and dropped the 2019 EPS estimate from $2.99 to $2.73.

Raymond James

Beacon believes it will recover some of its lost profits over the next two quarters, factoring in some price changes, Darkatsch said in a Monday note.

Raymond James won’t assume the same, but even so, the analyst said the second quarter “represents an ‘out-of-season’ period in the roofing industry, and the forward free cash flow yield remains compelling at nearly 15 percent.”

Buckingham

The extreme weather could hold upside later on as homeowners seek to repair damage, McGrath said in a Tuesday note.

Buckingham remains concerned about the competition for that business, though, and as a result isn’t increasing second-half earnings estimates, the analyst said. 

Beacon will report second-quarter earnings in early May.

Price Action

Beacon Roofing shares were down 5.19 percent at $32.34 at the time of publication Tuesday. 

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