Beacon Roofing (BECN) Gains Momentum, Hits 52-Week High

Shares of Beacon Roofing Supply, Inc. (NASDAQ:BECN) hit a 52-week high of $47.59 on Jul 7. However, the company closed the day’s trading a trifle lower at $47.02.

Shares of this distributor of roofing materials and building products reached an all-time high on the back of expected benefits from acquisitions, focus on greenfield growth as well as sustained demand in re-roofing activity.

The company has a market cap of $2.8 billion. It has beaten the Zacks Consensus Estimate in three out of the trailing four quarters, with an average surprise of 31.10%. The average volume of shares traded over the last three months was roughly 765K, with a solid one-year return of over 49.8% and year-to-date return of 14.2%.

Growth Drivers

Beacon Roofing has expanded its business through strategic acquisitions and diversification of its product offering. In Apr 2016, the company acquired Atlantic Building Products and Lyf-Tym. It also announced the buyout of Fox Brothers Company, which sells complementary and residential roofing products. Further, its takeover of Woodfeathers will help in capacity expansion in the key Pacific-Northwest market.

Notably, Beacon Roofing continues to focus on organic greenfield growth. It opened one new branch in 2016, six new Beacon branches in 2015, 26 new branches in 2014, and 10 new branches in 2013. These 43 new branch locations in the past three years have allowed the company to strategically penetrate deeper into many of its existing markets as well as enter new markets.

Historically, 75−80% of Beacon roofing revenues is related to re-roofing. Net sales from re-roofing are expected to improve as the median age of owner occupied housing has increased from 23 years in 1985 to 38 years in 2013, according to the U.S. Census data. The aging U.S. housing stock, combined with below average roofing shingle volumes, supports a favorable supply/demand dynamic in the residential repair and remodel market in the coming years.

These positive factors have led the company to enhance its revenues guidance to the range of $4.1–$4.2 billion for fiscal 2016. Adjusted EPS is projected in the range of $2.00–$2.10. Its record fiscal first-half performance has set a strong pace for the rest of the year. Moreover, Beacon roofing will continue to focus on sales growth, gross margin stability and improving operating leverage through the rest of the year.

In addition, the Zacks Consensus Estimate of Beacon roofing increased to $2.12 per share over the past 30 days for fiscal 2016. Similarly, the consensus estimate for fiscal 2017 rose to $2.48 per share over the same period.

Beacon roofing currently has a Zacks Rank #2 (Buy).

Stocks to Consider

Better-ranked stocks in the sector include The Home Depot, Inc. (NYSE:HD) , Lowe's Companies, Inc. (NYSE:LOW) and O'Reilly Automotive Inc. (NASDAQ:ORLY) . All these stocks carry a Zacks Rank #2 (Buy).