On Mar 13, we maintained our Neutral recommendation on
Beacon Roofing Supply, Inc.
), one of the three largest roofing material distributors in the
United States and Canada, on the back its active acquisition
pipeline, recovery in residential and non-residential
construction sectors, offset by concerns regarding difficult
comparisons ahead and a seasonally weak second quarter.
Beacon Roofing's first-quarter 2013 earnings were 37 cents per
share, down 5% year over year. Revenues increased 5% to $514
million, benefiting from the positive impact of several
acquisitions completed since the start of last year, offset by
lower average residential roofing selling prices.
Acquisitions are an important part of Beacon Roofing's growth
strategy. In the first quarter, Beacon acquired Ford Wholesale
Co., a distributor of residential and commercial roofing and
Construction Materials Supply marking its foray into the
attractive North California market. Earlier, in December, the
company acquired Pennsylvania-based McClure-Johnston Company.
With continued improvement in core industry trends, we expect the
company to aggressively pursue acquisitions in the near term.
The company continues to benefit from increased re-roofing
activities. Driving the demand for re-roofing is an aging U.S.
housing stock. Furthermore, weather damage, homeowners looking to
upgrade their homes, and sales of existing homes are also driving
demand. Furthermore, U.S. residential and non-residential
construction is finally stabilizing and is on the road to a
much-awaited recovery, which bodes well for the Beacon
On the flipside, Beacon is facing difficult comparisons as the
prior-year results benefited from storm damage, particularly in
residential business, which registered a 25% organic gain. The
company will face similar issues in the second quarter as the
residential business will be up against a 46% comparison.
Furthermore, the second quarter is typically affected
adversely by winter construction cycles and cold weather patterns
as the levels of activity in the new construction and re-roofing
markets decrease. As many of Beacon's expenses remain relatively
fixed throughout the year, the company generally incurs a loss
during the second quarter.
Other Stocks to Consider
Other stocks in the same industry with favorable Zacks rank
Lumber Liquidators Holdings, Inc.
), which carry a Zacks Rank #1 (Strong Buy) and
Plum Creek Timber Co. Inc.
) have a Zacks Rank #2 (Buy).
BEACON ROOFING (BECN): Free Stock Analysis
LUMBER LIQUIDAT (LL): Free Stock Analysis
LOUISIANA PAC (LPX): Free Stock Analysis
PLUM CREEK TMBR (PCL): Free Stock Analysis
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