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 levels.
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 gases 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 regulations.
Based in Houston, Texas, NCI Building Systems is 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.
(NOTE: We are re-issuing this story to correct some
inaccuracies. The original version, published earlier today, May
15, 2012, stated that NCI Building Systems competes with companies
CRA International Inc.
FTI Consulting, Inc.
Huron Consulting Group Inc.
CRA INTL INC (CRAI): Free Stock Analysis Report
FTI CONSULTING (FCN): Free Stock Analysis
HURON CONSLT GP (HURN): Free Stock Analysis
NCI BLDG SYSTEM (NCS): Free Stock Analysis
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