In line with its Ambition 2025 investment strategy, Beacon Roofing Supply, Inc. BECN acquired Medford, NY-based S&H Building Material Corporation (“S&H”). Over the past five decades, S&H has been serving Long Island builders, contractors and homeowners.
BECN expects this expansion will bring the opportunity to benefit S&H customers from its digital solutions, TRI-BUILT product line and the Beacon OTC network.
The stock fell 3.31% on Sep 5, after the news release.
Strategic Efforts: A Boon
Beacon has undertaken several strategic initiatives to drive its long-term ambition of growing and enhancing customers’ experiences, expanding its top line and margin and boosting value for customers, suppliers, employees and shareholders.
The company has been focusing on its Ambition 2025 targets (announced on Feb 24, 2022), which emphasize operational excellence, an above-market growth trajectory and accelerated stockholder value creation. The financial targets of Ambition 2025 assume $9 billion in sales (8% CAGR) and $1 billion in EBITDA (10% CAGR), which would translate into an 11% EBITDA margin (up 100 basis points from 2021).
As part of this initiative, Beacon has been focusing on business expansion through bolt-on acquisitions and divestitures. So far in 2023, the company has expanded its branch footprint through the completion of seven acquisitions and the opening of 14 new locations.
Second-quarter net sales grew 6.2% on a year-over-year basis, driven by solid execution on the Ambition 2025 growth program, including acquisitions and the opening of greenfield locations, as well as solid pricing.
For the third quarter, Beacon expects net sales to increase approximately 7% on a year-over-year basis and gross margin to be in the mid-to-high 25% range. It has also raised its full-year guidance. For 2023, net sales growth is anticipated to be between 4% and 6%, up from the previously expected range of 2-4%. Adjusted EBITDA is expected to be in the range of $850-$890 million (previously $810-$870 million).
The company plans to invest more in business expansion to yield 20-25 new greenfield locations in 2023.
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Shares of Beacon — the largest distributor of residential and non-residential roofing materials in the United States and Canada — have strongly outperformed the Zacks Building Products - Retail industry so far this year. BECN gained 47.9% in the said period compared with the industry’s 12.4% rally.
A solid residential backdrop, exceptional operating cost management and cash flow, a focus on the e-commerce platform, a new OTC (On-Time and Complete) Delivery Network and a newly designed website will help BECN gain further.
Zacks Rank & Key Picks
Beacon currently carries a Zacks Rank #3 (Hold).
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