NCI Building's 2H Fiscal 2016 Looks Good On Seasonality

We have issued an updated research report on NCI Building Systems Inc. (NYSE:NCS) on June 3, 2016. The manufacturer of metal products for the building industry is expected to benefit in second-half fiscal 2016 due to seasonality. Its efforts to simplify the organizational structure, the CENTRIA acquisition, improvement in non-residential construction activity and backlog growth also remain tailwinds.

Notably, in the second-quarter fiscal 2016 conference call, NCI Building stated that its consolidated revenue will range between $435–$455 million in third-quarter fiscal 2016, with gross margins ranging between 23% and 25.5%. It also anticipates second-half fiscal 2016 performance to be stronger than the first half due to seasonality. The company expects 2016 to be better than 2015 in terms of both gross margin and adjusted EBITDA.

NCI Building’s ongoing restructuring and reorganization efforts over the past two years are beginning to contribute to earnings growth. During second-quarter fiscal 2016, the company completed the consolidation and closing of two manufacturing facilities in metal components segment. The company believes that successful execution of the plans in phases over the next 6–30 months will result in annual cost savings ranging $15–$20 million.

Further, NCI Building continues to refine raw materials sourcing strategies. The company is purchasing steel with more precision and managing inventory quite well. In addition, it has made progress in manufacturing reorganization plans, which are expected to result in annual cost savings and efficiency improvement of $15–$20 million annually that will be phased in through the end of FY18.

The leading indicators for low-rise, non-residential construction activity signal a positive outlook for 2016. The American Institute of Architects' (AIA) Architecture Mixed Use Index, which is considered as a 9 to 11 month leading indicator for low rise non-residential starts, has been above 50 in 15 of the last 24 months. A reading above 50 indicates year-over-year growth.

Also, recent backlog trends are expected to support revenues. At the end of second-quarter fiscal 2016, order backlog was $533.4 million, up 5.7% year over year and 11.6%, sequentially.

NCI Building currently has a Zacks Rank #2 (Buy).

Stocks to Consider

Some other stocks worth considering in the same sector include Installed Building Products, Inc. (NYSE:IBP) , Simpson Manufacturing Co., Inc. (NYSE:SSD) and TopBuild Corp. (NYSE:BLD) . All of these stocks sport a Zacks Rank #1 (Strong Buy).


NCI BLDG SYSTEM (NCS): Free Stock Analysis Report

SIMPSON MFG INC (SSD): Free Stock Analysis Report

TOPBUILD CORP (BLD): Free Stock Analysis Report

INSTALLED BUILD (IBP): Free Stock Analysis Report

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