Gibraltar Industries Inc. (ROCK Quick QuoteROCK - Free Report) has been benefiting from its solid Three-Pillar strategy and the U.S. administration’s endeavor to boost the country's renewable energy and infrastructure, defying material and labor supply challenges, or delays and disruptions in solar project schedules due to panel supply issues. Shares of Gibraltar have lost 17.2% over the past six months, outperforming the industry’s 21.6% decline.

The Zacks Consensus Estimate for 2022 and 2023 earnings of $3.32 and $3.62 per share indicates 19.4% and 9% year-over-year growth, respectively. The solid growth rate depicts the stock's promising future.

The 2022 and 2023 earnings per share estimates for this Zacks Rank #2 (Buy) company have moved 0.6% and 0.3% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We believe that ROCK offers a sound investment opportunity, as evident from its VGM Score of B.

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Let’s delve deeper into the major driving factors.

Thee-Pillar Strategy: Gibraltar is progressing well, operationally and financially, on the back of its three-pillar growth strategy. The strategy is focused on three core tenets - Business Systems, Portfolio Management and Organizational Development. The first pillar, i.e., Business Systems, combines two of its previous strategic pillars, namely, operational excellence and product innovation. The second strategic pillar comprises Portfolio Management and Acquisitions. Through this pillar, the company is focused on optimizing its business portfolio.

In 2021, the company’s 30% revenue growth was mainly attributable to 21% contributions from acquisitions. Lastly, the third pillar of the strategy is Organizational Development. The Organizational Development primarily focuses on talent development, design and structure of an organization.

Solid Residential Business: The segment’s 80% to 90% business banks on existing home repair, either due to the home aging or weather damage. Historically, home repairs have not seen a significant impact from changing interest rates, repairs. Second-quarter 2022 net sales saw a 5.3% increase, which was driven by the Residential segment, driven by a 13% increase in pricing to customers.

Residential segment net sales increased 21.9%, marking the eighth consecutive quarter of double-digit growth. The segment’s adjusted operating and EBITDA margins grew 190 basis points and 150 basis points, respectively, on favorable price/cost management, supply-chain initiatives, labor management, volume leverage and 80/20 initiatives.

Strong Renewable Prospects: Although the renewable’s revenues decreased in the last two quarters and the second quarter backlog declined by 2% due to ongoing industry panel supply issues, subsequent field project inefficiencies and additional structural steel inflation, the U.S. solar industry has been witnessing a solid upside owing to the growing demand over the past couple of quarters.

This is evident from the latest installation trend prevalent in the nation. For instance, as reported by Solar Energy Industries Association (SEIA), residential solar had its biggest quarter in history, with 1.36 GWdc installed in the second quarter in the United States.

As a whole, the U.S. solar industry installed 4.6 GWdc of capacity in the second quarter, reflecting a sequential improvement of 12%. Also, the SEIA boosted its expectation for total U.S. solar deployments in 2022 by 100 MWdc. This upward trajectory of planned renewable energy projects reflects a resilient future for companies like Gibraltar.

Stable View: Based on the ongoing business dynamics, Gibraltar still expects revenues of $1.38-$1.43 billion, suggesting year-over-year growth of 3-6.7%. Adjusted earnings are likely to be in the range of $3.20-$3.40 per share, indicating a 15.1-22.3% year-over-year rise.

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