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Beacon Roofing's Q4 Earnings to Benefit From Cost Synergies

Zacks Equity Research

Beacon Roofing Supply, Inc. BECN is slated to report fiscal fourth-quarter 2019 results on Nov 25, after market close.

In the last reported quarter, the company came up with lower-than-expected earnings and revenues, which missed the Zacks Consensus Estimate by 25.8% and 3.4%, respectively. On a year-over-year basis, its top and bottom lines declined 0.5% and 22%, respectively. Higher-than-normal seasonal pressure impacted the results. Moreover, extreme weather conditions inflated variable expenses, which ultimately exerted pressure on its margins.

Beacon Roofing — which shares space in the Zacks Building Products - Retail industry with Fastenal Company FAST, Builders FirstSource, Inc. BLDR and GMS Inc. GMS — missed the consensus mark in four of the trailing six quarters.

Earnings & Revenue Expectation

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate for Beacon Roofing’s fiscal fourth-quarter revenues is pegged at $2.06 billion, indicating an increase of 6.4% from the year-ago reported figure. The consensus estimate for earnings is pegged at $1.22 per share, implying growth of 14% on a year-over-year basis.

Beacon Roofing Supply, Inc. Price and EPS Surprise

Beacon Roofing Supply, Inc. Price and EPS Surprise

Beacon Roofing Supply, Inc. price-eps-surprise | Beacon Roofing Supply, Inc. Quote

Factors to Note

Beacon Roofing — a distributor of residential and commercial roofing materials, and complementary building products — has been banking on strategic acquisitions, favorable demand trend in commercial roofing and a positive housing industry. Also, aggressive cost-control measures and favorable price/cost relationship are adding to the bliss.

Moreover, its integration of Allied Building Products, productivity enhancement techniques and digital platform is expected to have benefited the company in the to-be-reported. However, rising material costs have been denting its performance over the last few quarters.

As a distributor of residential roofing supplies, Beacon Roofing is sensitive to asphalt and shingle prices, which are highly volatile. Shingle prices have been volatile in recent years, partly due to volatility in asphalt prices. Although asphalt prices, which moved higher from February to April, remained stable in the July-September period, volatility of the commodity might have been a concern for the company.

Also, its commercial roofing market has been experiencing highly competitive pricing pressures. The maintenance, repair & operations supply market is highly fragmented, with many smaller local players competing directly on pricing issues.

Key Projections

The company’s Residential roofing products — which comprise 44.1% of Beacon Roofing’s existing market net sales — are expected to have contributed substantially to overall growth, given strong housing fundamentals. The Zacks Consensus Estimate for revenues of $886 million indicates 9.5% growth from $809.5 million in the year-ago period. Meanwhile, existing market net sales are expected to grow 7.5% year over year. The metric registered a 9.4% decline in the year-ago period.

The Non-residential roofing products’ net sales are expected to be $512 million, suggesting 3.8% growth from $493.4 million reported in the comparable 2018 period. Its existing market net sales are expected to increase 4.7% year over year. The metric declined 3.6% in the prior year.

Complementary building products’ existing market net sales are expected to grow 1.9% year over year, implying a decline from 2.8% growth reported in fiscal fourth-quarter 2018. Its net sales are expected to be $665 million, pointing to a 5.1% improvement from $632.8 million reported in the comparable 2018 period.

Zacks Rank

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

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Fastenal Company (FAST) : Free Stock Analysis Report
Beacon Roofing Supply, Inc. (BECN) : Free Stock Analysis Report
GMS Inc. (GMS) : Free Stock Analysis Report
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
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