We reiterate our Neutral recommendation on
NCI Building Systems Inc.
). Our recommendation on NCI Building Systems is in line with a
short-term Zacks #3 Rank (Hold).
The company reported an adjusted loss of 32 cents per share for
first-quarter of 2012, narrower than the Zacks Consensus Estimate
of a loss of 69 cents. Sales increased 28.2% to $243.6 million,
surpassing the Zacks Consensus Estimate of $210 million.
The company suffered since last year as it faced difficult
business conditions due to unprecedented reduction in the demand
for new constructions. According to the report of Mc-Graw Hill,
during the first-quarter of 2012, low-rise nonresidential
construction activity declined 6.4% (measured in square feet).
However, McGraw-Hill Constructions has predicted that
construction activities would increase in 2012 as compared to 2011.
Further, it expects that 2012 non-residential construction activity
measured in square feet will be 2% higher and increase 2% in dollar
value compared to 2011. It projects square footage at 685 million
in 2012 increasing from the previous year's 673 million.
Bookings, during first-quarter of 2012, increased 16% above the
comparable period in 2011. At the end of the quarter, backlog went
up 3.2% sequentially and 8.4% year over year to $222 million.
During the recent quarters, the company's rate of converting
backlog into production has become 30% faster than the 2010
Recently, NCI Building Systems has entered into a deal to
acquire Metl-Span LLC, a leader in the advancement of insulated
panel technology, for $145 million. It serves the Architectural,
Commercial, Industrial and Cold Storage industries (non-residential
building products market) with energy efficient and cost effective
insulated metal wall and roof panels and operates in five
manufacturing facilities in North America.
It is expected that the acquisition of Metl-Span by NCI Building
Systems will position the latter as a leader in the insulated metal
panel business by diversifying and expanding its existing product
range. In addition, NCI Building Systems will also be benefited by
a growing customer base as well as distribution network in North
America. The company expects the acquisition to be accretive to its
earnings in fiscal 2012.
On the flip side, the company depends highly on steel, one of
the most important raw materials. Thus, its business is
considerably influenced by steel prices. Moreover, the steel
industry is cyclical in nature and prices remained highly volatile
in recent years. There is also the apprehension of the steel prices
remaining volatile in future causing margin headwinds.
Moreover, the operational activities of NCI Building Systems are
dependent on rigid and complicated environmental laws and
regulations. These regulations are on air emissions, emission of
green house gasses and solid and hazardous industrial waste.
Various administrative, civil or criminal enforcement measures
would be taken against the company if it fails to adhere to the
Based in Houston, Texas, NCI Building Systemsis one of the
largest integrated manufacturers of metal products for the North
American non-residential construction industry. It has 31
manufacturing plants located across the United States and Mexico,
as well as distribution facilities throughout the U.S. and Canada.
It competes with companies like
CRA International Inc.
FTI Consulting, Inc.
Huron Consulting Group Inc.
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NCI BLDG SYSTEM (NCS): Free Stock Analysis
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