Beacon Roofing Supply, Inc.
) has recently acquired San Jose-based Ford Wholesale Co., a
distributor of residential and commercial roofing and related
accessories and Construction Materials Supply, a distributor of
residential roofing products.
These acquisitions mark Beacon Roofing's foray into the
attractive North California market. The Ford Wholesale
acquisition will add three locations in the region to Beacon
Roofing's kitty while Construction Materials Supply will add two
stores. The two acquisitions will increment Beacon Roofing's
sales by approximately $60 million.
As of November 30, 2012, the company had 10 locations in the
California compared with 4 locations as of November 30, 2011. The
company now intends to increase its presence in the North
Acquisitions are an important part of Beacon Roofing's growth
strategy. Over the last 10 years, the company has grown through a
combination of 22 strategic and complementary acquisitions,
including opening new branch locations, acquiring branches and
broadening its product offering. Sales have grown at a 10-year
compound annual growth rate of 14.0%. The company's internal
growth, which includes growth from existing and newly opened
branches but excludes growth from acquired branches, has averaged
4.7% annually over the same period.
Earlier, the company announced the acquisition of Structural
Materials Company in Southern California, Contractors Roofing
& Supply Co. in St. Louis and Pennsylvania-based
McClure-Johnston Company. The company's prime focus is to target
market leaders in geographic areas where it does not have a
presence. Beacon Roofing also acquires companies to supplement
branch openings within existing markets. Beacon Roofing remains
fairly active on the acquisition front and we expect the
acquisitions to continue at an accelerated pace in the near
However, this acquisition driven growth strategy exposes the
company to acquisition related risks. Management may have trouble
finding suitable acquisition candidates that provide synergies in
existing markets and upfront earnings accretion.
Both U.S. residential and non-residential construction sectors
are finally stabilizing and are on the road to a much-awaited
recovery, which bodes well for the Beacon Roofing. Demand for
re-roofing is also on the rise given an aging U.S. housing stock.
Beacon Roofing currently maintains a Zacks #3 Rank (Hold) over
the short term.
Beacon Roofing is a leading distributor of roofing materials
and complementary building products. It currently operates 229
branches encompassing 38 states in the United States and Canada.
Lumber Liquidators Holdings, Inc.
) is another Zacks #3 Rank stock in the same industry.
BEACON ROOFING (BECN): Free Stock Analysis
LUMBER LIQUIDAT (LL): Free Stock Analysis
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