Builders FirstSource (BLDR) to Divest Eastern Gypsum Operations
Builders FirstSource, Inc. BLDR has agreed to divest its Eastern U.S. Gypsum Distribution Operations (“Eastern Gypsum Operations”) to L&W Supply (“L&W”). The divestiture, pending regulatory approval and closing conditions, is expected to be completed in the third quarter of 2021. However, the financial terms of the deal have been kept under wraps.
The sale will intensify Builders FirstSource’s focus on its long-term plans of pursuing the growth initiatives in its core value-added business operations. The divestment is likely to help release capital and enable the company to invest more in its primary businesses.
The Eastern Gypsum Operation primarily consists of 21 facilities situated across the Northeast and Southeast U.S. The business generated nearly $160 million of revenues in 2020. L&W Supply will buy out all assets of the Eastern Gypsum Operations and will also provide services to its employees and customers.
In addition to divestment, Builders FirstSource believes in making acquisitions to strengthen its business portfolio.
On Jun 24, Builders FirstSource announced that it intends to acquire WTS Paradigm, LLC. WTS Paradigm is a software solutions and services provider for the building products industry. This acquisition is an important step toward investing in innovative digital solutions that will help the company to provide services to its customers more efficiently.
On May 24, the company announced that it will acquire Alliance Portfolio’s business. This will likely expand the company’s reach in Arizona and other fastest-growing areas of the country. On May 7, Builders FirstSource acquired a family-owned, leading supplier of lumber and other building materials company — John’s Lumber. The acquisition will improve Builders FirstSource’s product portfolio and expand its reach within Michigan.
On Jan 1, 2021, it completed all stock merger transaction with BMC. The acquisition of BMC will help it increase geographical reach in a highly-fragmented industry, enhance value-added offerings and generate higher level of free cash flow to invest in growth.
Share Performance
Share of Builders FirstSource have surged 119.5% over the past year compared with the Zacks Building Products – Retail industry’s 32.1% rally. The company is benefiting from its focus on cost synergies, strategic acquisition, and robust demand arising from solid housing and repair & remodeling activities. Moreover, Builders FirstSource is focused on investing in innovations and enhancing digital solutions for its customers. Meanwhile, earnings estimates for 2021 have moved up 9.2% over the past 60 days, depicting analysts’ optimism regarding its bottom-line growth potential.
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Zacks Rank & Key Picks
Currently, Builders FirstSource carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Building Building Products – Retail industry include Beacon Roofing Supply, Inc. BECN, Lowe's Companies, Inc. LOW and Fastenal Company FAST. Beacon Roofing and Lowe's Companies sport a Zacks Rank #1 (Strong Buy). Fastenal has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Beacon Roofing and Lowe's fiscal 2021 earnings are expected to rise 55% and 22.1%, respectively.
Fastenal has a long-term expected earnings per share (three to five years) growth rate of 9%.
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