On Nov 28, Zacks Investment Research downgraded
Beacon Roofing Supply, Inc.
), one of the three largest roofing material distributors in the
U.S. and Canada, to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
On Nov 26, Beacon reported lower-than-expected fourth-quarter
fiscal 2013 (ended Sep 30, 2013) results.
Adjusted earnings per share declined 7% to 56 cents from 60 cents
earned in the year-ago quarter. The results fell short of the
Zacks Consensus Estimate of 62 cents. Despite record revenues and
continued cost control, lower gross margins led to the
Revenues in the quarter increased 14% year over year to a record
$683 million, but missed the Zacks Consensus Estimate of $689
Gross margin contracted 190 basis points year over year to 23.1%
due to continued impact of product cost increases, that have not
been passed on to customers, and a higher mix of non-residential
In addition, the Architecture Billings Index in October fell to
51.6 after hitting a seven-month high of 54.3 in September,
reflecting the uncertain U.S. economic outlook. Moreover, higher
construction costs, labor shortage and lack of funds for real
estate projects are likely to remain headwinds for the
non-residential construction sector and may affect the company.
Beacon delivered negative earnings surprises in three of its last
four quarters with an average negative surprise of roughly 14%.
Following the fourth-quarter earnings announcement, the Zacks
Consensus Estimate for Beacon dropped 4% to $1.80 per share for
fiscal 2014 and around 1% to $2.13 a share for fiscal 2015.
Other Stocks to Consider
Better-ranked stocks in the same industry include
Builders FirstSource, Inc.
James Hardie Industries plc
) both with a Zacks Rank #1 (Strong Buy), as well as
Lumber Liquidators Holdings, Inc.
) carrying a Zacks Rank #2 (Buy).
BEACON ROOFING (BECN): Free Stock Analysis
BUILDERS FIRSTS (BLDR): Free Stock Analysis
JAMES HARDI-ADR (JHX): Free Stock Analysis
LUMBER LIQUIDAT (LL): Free Stock Analysis
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