) has seen estimates for 2013 and 2014 fall recently. A recent
downgrade has pushed the Zacks Rank to the lowest level. BECN is a
Zacks Rank #5 (Strong Sell). It is the Bear of the Day.
The stock fell a significant amount the other day due to a
downgrade from Robert W. Baird. The investment firm lowered their
rating on the stock to Neutral from Outperform and took their
target down to $39 from $42 based on lower estimates. Lowered
estimates are a key reason stocks become Zacks Rank #5 (Strong
Beacon Roofing Supply, Inc. distributes residential and
non-residential roofing materials to contractors, home builders,
building owners, and other resellers. As of August 9, 2013, it
operated through a network of 231 branches in 38 states of the
United States, and Canada. Beacon Roofing Supply, Inc. was founded
in 1928 and is based in Peabody, Massachusetts.
BECN has hit a rough patch in what is a spotty-to-good earnings
history. The last three reports have all come in under the Zacks
Consensus Estimate, with the most recent miss being the biggest in
quite a while. The company reported earnings of $0.55 vs. the $0.71
estimate, for a miss of $0.16 or 22% below expectations. On that
earnings release the company also lowered guidance, further
reducing expectations for the future.
Over the last 5 quarters, the topline has been challenged as well.
While still posting year over year growth in the last two quarters,
the company has not been able to beat the Zacks Consensus revenue
estimate since the March 2012 quarter.
Earnings Estimates Slip
Estimates for BECN have been sliding of late. Starting in April,
the 2013 Zacks Consensus Estimate was $1.87, but that soon fell to
$1.80 the following month. Estimates dropped to $1.79 in July and
are now at $1.55.
2014 Estimates have also been slashed. The year started off with
expectations of $2.09. That seems like a lifetime ago and current
estimates are calling for $1.55.
The valuation picture for BECN is rather rich given the recent
snafu in earnings. A 24x trailing PE is just slightly lower than
the industry average of 26.7x, while the forward PE of 24x is equal
to the industry average. One might expect to see a discount on
these metrics given the misses and recent lowering of guidance. The
price to book multiple of 2.5x is below the 4.4x industry average,
as is the price to sales multiple of 0.8x vs. the 1.1x industry
average so it's not totally out of line.
The price and consensus chart really tells the story of what is
going on at BECN. The estimates have shown some great growth over
the last few years, but the recent spate of earnings misses coupled
with lower guidance has turned the estimate lines in the wrong
direction. With only 1 names hurricane and only 4 more weeks left
in storm season, a big driver for this company has turned out to be
a real washout.
There are alternative to this supplier of materials to homeowners.
Investors may want to look to
) as it carries a Zacks Rank of #1 (Strong Buy).
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
Breakout Growth Trader
a trading service that focuses on small cap stocks and also carries
a risk limiting strategy. Subscribers get daily emails along with
buy, and sell alerts.
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