TopBuild's Future Prospects: Analyst Highlights Single-Family Market Rebound And Growth In Commercial/Industrial Segment

Truist Securities analyst Keith Hughes reiterated a Buy rating on TopBuild Corp. BLD, raising the price target to $340 from $256.

BLD recently reported Q2 results, where earnings beat estimates. Sales increased by 3.4% to $1.3 billion.

The analyst notes that a combination of backlog, multi-family strength, and synergies from the DI deal continue to help results.

The company raised EBITDA guidance range to $950 million-$1.00 billion from $820 million-$910 million (Street $908 million).

The updated guidance does not include the company's recent acquisition of SPI. The analyst thinks there could be some notable upside to this guide, as management did not factor in 80 basis points of gross margin efficiencies and the typical 5% seasonal uptick in sales to their assumptions for the back half of the year. 

The analyst raised the 2023 EBITDA estimate to $999 million from $919 million and the 2024 EBITDA estimate to $1.10 billion from $937 million.

This apart, Hughes believes the single-family market will bottom shortly, and 2024 looks like a strong growth year. 

The analyst notes that the company expects housing starts in the 1,040-1,050 million range for the single-family market, which would represent roughly 4% y/y growth at the midpoint.

BLD recently announced an agreement to purchase Specialty Products & Insulation (SPI) for $960 million, which is about 12.5x EV/EBITDA before considering a $90 million tax asset. 

The analyst adds that the deal will add roughly 15% to BLD's total revenue on a go-forward basis and shift the revenue mix from 34% commercial/industrial to 39% commercial/industrial.

Price Action: BLD shares are trading higher by 3.84% to $295.65 on the last check Friday.

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