On Jan 16, 2014, we downgraded our recommendation on
Gibraltar Industries Inc.
) to Underperform from Neutral. The construction industry is
going through a bad phase, reflected in the
lower-than-appropriate Architecture Billings Index (ABI) in Nov
Why the Downgrade?
Gibraltar Industries offers products that range from
ventilation and expanded metal to mail storage solutions and rain
dispersion products and solutions, and operates primarily in the
industrial and buildings market.
A significant amount of the company's revenues is derived from
the construction markets. However, the construction activities
have been slowing down recently. In a recent report from the
American Institute of Architects (AIA), ABI fell to a level of
49.8 in Nov 2013, compared with 51.6 in Oct 2013. This also
compared unfavorably to the fact that an ABI score of 50 or above
is taken to be a positive signal. The uncertainty of the
Government spend continues to hover around the institutional
In this situation, Gibraltar Industries' over-dependence on a
handful of customers worries us. The company's lack of long-term
contracts with its clients, may also lead to a possibility of
termination of the purchase leading to a severe loss.
Although strategic acquisitions are a viable means of
expanding Gibraltar Industries' market share, there are some
demerits as well. More acquisitions in the international markets
exposes the company to various risks including foreign currency
translation, various environmental and economical laws as well as
challenges from cultural diversity of the countries in which it
The company is expected to release the fourth-quarter 2013
results on Feb 20. The Zacks Consensus Estimate for the same
stands at 5 cents, reflecting a year-over-year decline of
Other Stocks to Consider
Gibraltar Industries has a current market capitalization of
$552.6 million. Some stocks like
Companhia Siderurgica Nacional
United Rentals, Inc.
AK Steel Holding Corporation
) are worth considering in the industry. While Companhia
Siderurgica sports a Zacks Rank #1 (Strong Buy), United Rentals
and AK Steel Holding carries a Zacks Rank #2 (Buy).
AK STEEL HLDG (AKS): Free Stock Analysis
GIBRALTAR INDUS (ROCK): Free Stock Analysis
CIA SIDERUR-ADR (SID): Free Stock Analysis
UTD RENTALS INC (URI): Free Stock Analysis
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