Beacon Roofing's Financial Health, M&A Potential And Expansion Initiatives Prompt Analyst's Price Target Raise

BMO Capital Markets analyst Ketan Mamtora raised the price target of Beacon Roofing Supply Inc BECN to $90 from $75, maintaining an Outperform rating.

The analyst has confidence in BECN's medium-term growth, margin expansion initiatives, and capability to cruise through tough economic conditions.

Management noted that new housing demand (20% of overall roofing demand) is improving better than expected at the start of 2023.

Also, the company sees re-roofing demand in California as boosting due to unfavorable weather and relatively stable pricing.

Mamtora cites BECN's plans to launch new product lines, boost digital penetration, and cost and efficiency improvement initiatives.

The analyst is bullish on BECN's strong balance sheet and sees the scope of merger & acquisitions, expecting increased share repurchases in the event of a lack of larger buyouts. 

Related: Beacon Roofing Expands In Nevada Through Strategic Buyout

Mamtora raised the estimate for 2023 EBITDA to $840 million (from $821 million) and 2024 to $850 million (from $830 million) on the lower-than-expected decline in single-family starts and near-term improvement in re-roofing business in California. 

Also, the analyst increased the estimate for EPS to $6.14 (from $5.95) each for both 2023 and 2024

Today, the company disclosed the further expansion plan of its specialty waterproofing division, naming a broader leadership team and opening two new branches in key Florida markets.

Price Action: BECN shares are trading higher by 0.14% at $79.57 on the last check Friday.