Beacon (BECN) Up 67% This Year: Will the Rally Continue in 2024?
Shares of Beacon Roofing Supply, Inc. BECN gained 66.6% in the year-to-date period compared with the Zacks Building Products – Retail industry’s rise of 16.3%. The company is benefiting from strategic initiatives and expansions through acquisitions. Also, the emphasis on digital initiatives bodes well.
The Federal Reserve's recent decision to stabilize interest rates signals optimism for the housing market and related industry. Federal Open Market Committee (FOMC) has kept interest rates at a 22-year high of 5.25-5.5%, with hints of potential rate cuts by the end of 2024. This stability is a relief for the overall housing industry.
The Zacks Rank #1 (Strong Buy) company’s 2024 earnings and sales are likely to witness growth of 7.1% and 2.7% year over year, respectively. The company has a long-term earnings growth rate of 9.2% and currently holds a VGM Score of A, supported by a Value, Growth and Momentum Score of A.
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Let’s discuss the major driving factors.
Strategic Initiatives to Drive Growth: Beacon has undertaken several strategic initiatives to drive its long-term ambition of growing and enhancing customer experience, enhancing the top line and margin and boosting value for customers, suppliers, employees and shareholders. The company is focusing on its Ambition 2025 targets, announced on Feb 24, 2022, which prioritize operational excellence, above-market growth and accelerated shareholder value. Ambition 2025 aims for $9 billion in sales (8% CAGR), $1 billion in EBITDA (10% CAGR) and 11% EBITDA margins by 2025, reflecting a 100 basis points (bps) increase from 2021 levels.
In the first nine months of 2023, the company opened 19 new branch locations. Also, the company added 3 Greenfields during the third quarter of 2023. BECN continues to focus on expansion to drive growth through acquisitions and the addition of greenfield locations. The company plans to open 25 branches in 2023.
Beacon focuses on four key strategies — organic growth, digital growth, OTC (On-Time and Complete) and branch performance. This boosts sales and enhances profitability. The company aims to improve exterior and interior branches, offering customers a top-tier e-commerce platform, a new OTC Delivery Network and a redesigned website. BECN's OTC strategy uses its branch network density for efficient customer service.
Robust Acquisitions Bode Well: BECN is expanding its business through bolt-on acquisitions. Since the announcement of the Ambition 2025 plan, the company acquired 14 companies, adding 43 branches and nearly $400 million in annual revenues. This expansion strengthens BECN's nationwide presence and revenue.
During third-quarter 2023, BECN acquired four companies, including All American Vinyl Siding Supply, S&H Building Materials, Crossroads Roofing Supply and H&H Roofing Supply. On Oct 2, 2023, BECN expanded its waterproofing presence by acquiring Garvin Construction Products. This move strengthened the company's Northeast footprint, adding five locations from the D.C. Metro up to Boston. BECN aims to enhance its capabilities in the growing waterproofing category.
Digital Initiatives to Enhance Margins: BECN continues to drive growth and improved margins through its digital initiatives. During the third quarter of 2023, sales through its online platform delivered nearly 150 bps better margins than offline channels, driven by its strong digital capability. The comprehensive digital offering provides a competitive edge, emphasizing BECN's commitment to delivering maximum value to customers.
The digital integration with Acculynx — a leading provider of all-in-one business management software for roofing contractors — resulted in a 22% year-over-year surge in digital sales during the third quarter.
The company’s new Beacon Pro+ mobile application, which is custom-designed for iPhone and Android devices contributed to the growing digital sales of Beacon. It is on track with the long-term target of generating $1 billion in annual digital sales.
Other Key Picks
Some other top-ranked stocks from the Zacks Retail-Wholesale sector are:
Brinker International, Inc. EAT currently sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 37.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) suggests a rise of 5.1% and 26.2%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. ANF flaunts a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 713%, on average. Shares of ANF have surged 292.9% in the past year.
The Zacks Consensus Estimate for ANF’s 2024 sales and EPS suggests increases of 13.3% and 2,196%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. ARCO carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.3%, on average. Shares of ARCO have surged 53.1% in the past year.
The Zacks Consensus Estimate for ARCO’s 2023 sales and EPS indicates 19.3% and 18.8% growth, respectively, from the year-ago period’s levels.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
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Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
