Gibraltar Industries Inc. (NASDAQ:ROCK) is poised to benefit from the four-pillar value creation strategy, well-planned acquisitions and improving operational excellence. Although higher raw material costs, along with lower demand in the Infrastructure segment, have been creating headwinds, this leading manufacturer and distributor of building products has been performing pretty well in the past few quarters, with effective price-material cost management.
Shares of the company have outperformed the Zacks Building Products – Miscellaneous industry in a year’s time. Meanwhile, earnings estimates have been revised upward over the past few weeks, suggesting that sentiments on Gibraltar are moving in the right direction. Earnings estimates for 2019 have increased 4.3% over the past 30 days.
This positive trend justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
What Makes Gibraltar a Solid Bet
Four-Pillar Strategy: Four-pillar value creation strategy —comprising operational excellence, product innovation, portfolio management and acquisitions — is driving growth for the company. Notably, Gibraltar’s product offering through 80/20 initiatives contributed significantly to its third-quarter performance. Markedly, innovative products accounted for 10% of the total revenues of the company as of Sep 30, 2018, up from 7% in 2017.
Meanwhile, Gibraltar remains committed to acquire companies that have significant long-term value. The company generally seeks to acquire assets that have attractive end markets, with unique value propositions and patented products or technologies. Notably, on Aug 23, 2018, it acquired privately-held SolarBos, a provider of electrical balance of systems products for the solar renewable energy market in the United States.
In a nutshell, the above-mentioned strategies helped the company to generate strong financial results, make efficient use of capital and deliver higher shareholder returns.
Earnings Strength: Higher input cost inflation has been hurting the company’s performance to some extent. The steel and aluminum tariffs announced in 2018 continued to impact its material costs. Although the company has been working to recover higher commodity costs through price increases, it expects continued volatility in material costs, owing to tariff-related issues. That said, Gibraltar has solid growth prospects, which is evident from the Zacks Consensus Estimate for earnings of $2.43 for 2019. The company’s earnings are expected to grow 17.2% year over year, higher than the industry’s anticipated growth rate of 11.7%.
VGM Score: Gibraltar has a VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth and momentum characteristics. In fact, our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), make a solid investment choice.
Other Stocks to Consider
Other top-ranked stocks in the Construction sector include Armstrong Flooring, Inc. (NYSE:AFI) , Gates Industrial Corporation PLC (NYSE:GTES) , and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) , each carrying a Zacks Rank #2 at present.
Armstrong Flooring surpassed earnings estimates in three of the trailing four quarters, the average positive surprise being 38.9%.
Gates Industrial and Great Lakes’ earnings for 2019 are expected to grow 9.7% and 1,400%, respectively.
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