GMS Buys Kamco for $321.5M, Expects Cost & Revenue Synergies
GMS Inc. GMS completed the acquisition of a leading supplier of ceilings, wallboard, steel, lumber and other complementary construction products — Kamco Supply Corporation and its affiliates.
Brooklyn, NY-based Kamco is a leading supplier of ceilings, wallboard, steel, lumber and other related construction products. It operates five distribution facilities located in the Greater New York City area and services the New York metro and tri-state area. For the trailing 12 months (which ended on Dec 31, 2023), Kamco generated revenues of approximately $235 million from its four established distribution facilities and recently opened Bronx greenfield.
GMS expects to capitalize on cross-selling opportunities with Kamco and other businesses. The recent expansion in the Wallboard and Complementary product lines presents compelling opportunities for GMS to better capitalize on potential growth in the market and provide an even higher level of service to customers.
Meanwhile, GMS believes the Bronx location will meaningfully add to Kamco’s top-line growth as its operations mature.
GMS expects this transaction to generate both cost and revenue synergies in the future through the integration of its distribution network and purchasing programs, cross-selling opportunities, complementary product additions to Kamco’s offerings and SG&A savings.
Stock Performance
Shares of GMS gained 50.1% in the past year versus the Zacks Building Products - Retail industry’s 26.9% growth.
Image Source: Zacks Investment Research
Recently, the company reported net sales growth of 1.9% year over year, backed by solid demand in commercial and multi-family construction and an improving single-family backdrop, which drove volume in each of the major product categories despite weather-related project delays in January. Recent acquisitions also contributed positively to the growth.
The company benefits from solid Wallboard, Ceilings and Complementary Products sales growth, expansion through accretive acquisitions and greenfield opportunities, and strategic efforts to drive productivity and profitability.
Gross margin was up 40 basis points (bps), which reflects improved volumes and the associated attainment of calendar year-end volume incentive targets, partially offset by deflationary dynamics in steel pricing. Adjusted EBITDA margin also rose 120 bps year over year.
The firm remains optimistic and expects to balance investing in strategic initiatives, including M&A and strengthening the balance sheet by paying down debt.
Zacks Rank
GMS currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases
Beacon Roofing Supply, Inc. BECN reported better-than-expected results for fourth-quarter 2023. Its earnings and net sales surpassed the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis.
BECN reported net sales growth for the trailing 12 quarters, highlighting the resiliency of its business model. This is driven by diligent pricing execution, productivity, and improvements from the bottom quintile branch initiative.
Builders FirstSource, Inc. BLDR reported impressive earnings in fourth-quarter 2023. The bottom line surpassed the Zacks Consensus Estimate and improved from the previous year. Despite a challenging operating environment in 2023, where single-family starts witnessed significant reduction, the company delivered mid-teens or better adjusted EBITDA margin for 11 consecutive quarters.
Net sales surpassed the consensus mark but declined year over year due to a slowdown in residential construction demand, particularly in the Single-Family market.
Home Depot Inc. HD reported solid fourth-quarter fiscal 2023 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Meanwhile, the company’s sales and earnings per share declined year over year in the fourth quarter and fiscal 2023.
HD noted that fiscal 2023 was a year of moderation. Nonetheless, the company is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best-interconnected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this industry.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Beacon Roofing Supply, Inc. (BECN) : Free Stock Analysis Report
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
GMS Inc. (GMS) : Free Stock Analysis Report
