Will Sluggish Demand Impact Beacon Roofing's (BECN) Results?

On Apr 10, we issued an updated research report on Beacon Roofing Supply, Inc. (NASDAQ:BECN) .

Sluggish asphalt shingle demand remains the major drag on the company’s performance. Declining oil prices, general market softness, volatile exchange rates and intense competition also remain concerns.

Notably, overall asphalt shingle demand is expected to remain relatively flat in 2017. Even though the repair remodel represents the majority product demand for Beacon Roofing, the timing of replacement decisions can vary due to economic factors and weather conditions.

In addition, Beacon Roofing’s strategy of acquiring its distributors of roofing materials and complementary products has inherent risks. There may be unforeseen difficulties in integrating operations and technologies. Moreover, the company may face difficulties in entering geographic regions where it does not have prior experience. These factors might lead to lower-than-expected synergies and escalate costs.

Declining oil prices could hurt roofing manufacturers’ pricing (both asphalt shingles and non-residential roofing). This will subsequently affect the company’s pricing and hurt its margins.

Further, general market softness, strong competition, volatile exchange rates and uncertainty regarding weather conditions remain matters of concern.

Moreover, Beacon Roofing underperformed the Zacks classified Building Products- Retail/Wholesale sub-industry with respect to the year-to-date price performance. The stock gained around 6.7%, while the industry recorded growth of 11%.

Beacon Roofing currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the sector include Rush Enterprises, Inc. (NASDAQ:RUSHA) , Tech Data Corp. (NASDAQ:TECD) and Papa Murphy's Holdings, Inc. (NASDAQ:FRSH) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rush Enterprises delivered an average positive earnings surprise of 12.78% in the trailing four quarters. Tech Data and Papa Murphy's Holdings also delivered average positive earnings surprise of 8.73% and 147.69%, respectively, in the past four quarters.

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