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In the last reported quarter, the company’s adjusted earnings topped the Zacks Consensus Estimate but declined 10.5% year over year due to tepid net sales and a timing shift in product mix toward lower margins. The weakening Multi-Family market and higher mortgage rates were major headwinds despite growth in the Single-Family market.
On an impressive note, BLDR has a solid earnings surprise history. The company has topped analysts’ expectations in the trailing 23 quarters. The average surprise of the last four quarters is 22.6%, as shown in the chart below.
Image Source: Zacks Investment Research
Trend in Estimate Revision
The Zacks Consensus Estimate for BLDR’s second-quarter earnings per share (EPS) is pegged at $3.08, indicating a downward revision from $3.16 in the past seven days. The estimated figure reflects a 20.8% decrease from the prior year’s reported figure of $3.89.
Image Source: Zacks Investment Research
The consensus estimate for net sales is pinned at $4.48 billion, indicating a 1.2% decline from the year-ago quarter’s reported figure of $4.53 billion.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Builders FirstSource this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as elaborated below.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: BLDR currently carries a Zacks Rank #3.
What’s Influencing Q2 Results?
Builders FirstSource’s second-quarter results are likely to generate lower sales, thanks to tepid growth in the new residential construction market and lower repair and remodeling (R&R) activities. A weaker multi-family market, persistently high mortgage rates and reduced consumer spending are likely to have acted as an obstacle for this largest building materials supplier in the United States. In the second quarter, the company expects net sales to decrease in the low single digits to flat.
Coming to the bottom line, BLDR expects adjusted EBITDA to be down in the high teens in the second quarter. Margins are likely to have compressed due to existing inflationary pressure for material and labor and other macroeconomic woes. The company has been witnessing a product mix shift toward lower-margin commodity products over the past few quarters and expects to remain the same in the second quarter.
Price Performance, Valuation & Returns
BLDR’s shares have inched up 0.6% in the year-to-date period versus the Zacks Building Products - Retail industry’s 7.3% growth. The broader Zacks Retail-Wholesale sector rose 11.5%, and the S&P 500 grew 16% in the same time frame.
Image Source: Zacks Investment Research
Builders FirstSource’s stock is currently undervalued compared to its industry, as shown in the chart below. This might imply that the market has not yet fully recognized or priced the company's potential growth prospects or earnings potential. Its forward 12-month price-to-earnings ratio of 12.32X is largely below the industry’s average of 21.07X.
Image Source: Zacks Investment Research
BLDR provides solid investment returns compared with the industry’s average, as reflected by its current trailing 12-month ROE of 38.7%. This indicates the company efficiently uses its shareholders’ funds.
Image Source: Zacks Investment Research
Investment Thoughts: Is BLDR a Buy, Sell or Hold?
Builders FirstSource, an S&P 500 company with a market cap of $20.46 billion, is currently navigating challenges posed by a sluggish housing and R&R market as well as prevailing inflationary conditions. Despite these headwinds, BLDR’s shares have increased an impressive 24.7% in the past month versus the industry's growth of 11.8%.
Investors sentiment might have got a boost on the news that the CME FedWatch tool showed nearly 100% chance of an interest rate cut in September. In fact, in its recent press conference held on Jul 31, the Federal Reserve hinted that it is nearer to easing monetary policy as it cited some further progress on inflation, and Fed’s chair Jerome H. Powell told reporters a September cut "could be on the table."
BLDR has also outperformed other industry players like GMS Inc. (GMS - Free Report) , Beacon Roofing Supply, Inc. (BECN - Free Report) and Fastenal Company’s (FAST - Free Report) respective growth of 20.9%, 16.3% and 11.4% in the same time frame.
Image Source: Zacks Investment Research
The company’s focus on strategic acquisitions, digital solutions and productivity, as well as investments in innovative and value-added products, are likely to have aided the company’s second-quarter results to some extent and will continue to do so in future.
Given the uncertainty regarding future rate cuts and stability in the housing market, current shareholders are advised to hold their positions, while potential investors might consider waiting for a more favorable entry point despite higher ROE with attractive valuation.
Image: Bigstock
How to Play Builders FirstSource (BLDR) Before Q2 Earnings?
Builders FirstSource, Inc. (BLDR - Free Report) is slated to report second-quarter 2024 results on Aug 6, before the opening bell.
In the last reported quarter, the company’s adjusted earnings topped the Zacks Consensus Estimate but declined 10.5% year over year due to tepid net sales and a timing shift in product mix toward lower margins. The weakening Multi-Family market and higher mortgage rates were major headwinds despite growth in the Single-Family market.
On an impressive note, BLDR has a solid earnings surprise history. The company has topped analysts’ expectations in the trailing 23 quarters. The average surprise of the last four quarters is 22.6%, as shown in the chart below.
Image Source: Zacks Investment Research
Trend in Estimate Revision
The Zacks Consensus Estimate for BLDR’s second-quarter earnings per share (EPS) is pegged at $3.08, indicating a downward revision from $3.16 in the past seven days. The estimated figure reflects a 20.8% decrease from the prior year’s reported figure of $3.89.
Image Source: Zacks Investment Research
The consensus estimate for net sales is pinned at $4.48 billion, indicating a 1.2% decline from the year-ago quarter’s reported figure of $4.53 billion.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Builders FirstSource this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as elaborated below.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: BLDR currently carries a Zacks Rank #3.
What’s Influencing Q2 Results?
Builders FirstSource’s second-quarter results are likely to generate lower sales, thanks to tepid growth in the new residential construction market and lower repair and remodeling (R&R) activities. A weaker multi-family market, persistently high mortgage rates and reduced consumer spending are likely to have acted as an obstacle for this largest building materials supplier in the United States. In the second quarter, the company expects net sales to decrease in the low single digits to flat.
Coming to the bottom line, BLDR expects adjusted EBITDA to be down in the high teens in the second quarter. Margins are likely to have compressed due to existing inflationary pressure for material and labor and other macroeconomic woes. The company has been witnessing a product mix shift toward lower-margin commodity products over the past few quarters and expects to remain the same in the second quarter.
Price Performance, Valuation & Returns
BLDR’s shares have inched up 0.6% in the year-to-date period versus the Zacks Building Products - Retail industry’s 7.3% growth. The broader Zacks Retail-Wholesale sector rose 11.5%, and the S&P 500 grew 16% in the same time frame.
Image Source: Zacks Investment Research
Builders FirstSource’s stock is currently undervalued compared to its industry, as shown in the chart below. This might imply that the market has not yet fully recognized or priced the company's potential growth prospects or earnings potential. Its forward 12-month price-to-earnings ratio of 12.32X is largely below the industry’s average of 21.07X.
Image Source: Zacks Investment Research
BLDR provides solid investment returns compared with the industry’s average, as reflected by its current trailing 12-month ROE of 38.7%. This indicates the company efficiently uses its shareholders’ funds.
Image Source: Zacks Investment Research
Investment Thoughts: Is BLDR a Buy, Sell or Hold?
Builders FirstSource, an S&P 500 company with a market cap of $20.46 billion, is currently navigating challenges posed by a sluggish housing and R&R market as well as prevailing inflationary conditions. Despite these headwinds, BLDR’s shares have increased an impressive 24.7% in the past month versus the industry's growth of 11.8%.
Investors sentiment might have got a boost on the news that the CME FedWatch tool showed nearly 100% chance of an interest rate cut in September. In fact, in its recent press conference held on Jul 31, the Federal Reserve hinted that it is nearer to easing monetary policy as it cited some further progress on inflation, and Fed’s chair Jerome H. Powell told reporters a September cut "could be on the table."
BLDR has also outperformed other industry players like GMS Inc. (GMS - Free Report) , Beacon Roofing Supply, Inc. (BECN - Free Report) and Fastenal Company’s (FAST - Free Report) respective growth of 20.9%, 16.3% and 11.4% in the same time frame.
Image Source: Zacks Investment Research
The company’s focus on strategic acquisitions, digital solutions and productivity, as well as investments in innovative and value-added products, are likely to have aided the company’s second-quarter results to some extent and will continue to do so in future.
Given the uncertainty regarding future rate cuts and stability in the housing market, current shareholders are advised to hold their positions, while potential investors might consider waiting for a more favorable entry point despite higher ROE with attractive valuation.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.