We are upgrading our recommendation on Beacon Roofing from
Underperform to Neutral, with a target price of $42.00.
Fourth-quarter 2013 adjusted earnings of Beacon dropped 7% year
over year to $0.56 per share, due to lower gross margins. The
company will benefit from continued focus on acquisition and its
strong balance sheet position. U.S. housing starts also jumped to
the highest level in five years, in November. While, pricing
pressure, general market softness and competitive market remain
headwinds for top-line growth. Further, the Architecture Billings
Index fell to 49.8 in November, from 51.6 a month earlier due to
uncertainty in demand. Moreover, higher mix of non-residential
roofing products and sales mix will negatively impact gross margins
in the near term.
Founded in 1928, Beacon Roofing Supply, Inc. (BECN) is one of
the three largest roofing material distributors in the United
States and Canada, with more than 90% of its sales coming from the
U.S. Besides selling roofing materials asphalt shingles and
single-ply roofing to both residential and non-residential markets,
Beacon also deals in complementary building materials such as vinyl
siding, doors, windows, insulation, and waterproofing systems. The
company operates 236 branches across 39 states in the U.S. and 6
provinces in Canada. Its competition is primarily from local and
regional roofing supply distributors. Local contractors dealing
with roof replacement make up the bulk of its sales.
Beacon Roofing Supply, Inc. (BECN): Read the Full
BEACON ROOFING (BECN): Free Stock Analysis
To read this article on Zacks.com click here.