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Beacon Roofing (BECN) Completes the Sale of Interior Products

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  • BECN

Beacon Roofing Supply, Inc. BECN recently announced the sale of its interior products and insulation businesses (Interior Products), in line with the company’s efforts to improve financial flexibility and focus on its core exteriors business. Beacon sold Interior Products to Foundation Building Materials, majority-owned by units of American Securities LLC, a leading U.S. private equity firm. The transaction is valued at $850 million, which is subject to some adjustments.

With this divestiture, the company is committed toward growing sales and profitability as well as pursuing strategic growth initiatives for its core exteriors business. The divestment will help Beacon return to its legacy position as a focused leader with exterior building products distribution. Notably, 80-85% of the company’s continuing business will be within residential and commercial roofing. Driven by high concentration on non-discretionary repair and remodel demand, exteriors offer a unique platform for the company.

Beacon plans to use the expected after-tax proceeds of $750 million from this divestiture to reduce net leverage and strengthen its balance sheet.

Beacon’s President and Chief Executive Officer, Julian Francis, stated, ‘’Finalizing the sale of Interior Products represents a transformational event for our Company, as we focus on growing our core exteriors business, proceeds from the sale significantly enhance our financial flexibility.”

Share Price Performance

Beacon Roofing’s shares have outperformed the industry in the past six months. Earnings estimates for the current year have been trending upward over the past 30 days, depicting analysts’ optimism over the company’s growth prospect.

Recently, the company came up with strong results for first-quarter fiscal 2021. Its bottom line topped the Zacks Consensus Estimate, mainly backed by a solid residential backdrop, stronger gross margins and reduced operating expenses. Its increased focus on the e-commerce platform, new OTC (On-Time and Complete) Delivery Network and a newly-designed website are other positives.

For fiscal 2021, the company expects sales from continuing operations to grow in the high single digit. Adjusted EBITDA is projected in the range of $500-$525 million for continuing operations. This improvement reflects strong sales growth, gross margin gains and favorable operating leverage.

Zacks Rank

Beacon Roofing — which shares space with Builders FirstSource, Inc. BLDR, Fastenal Company FAST and Lowe's Companies, Inc. LOW in the Zacks Building Products - Retail industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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