Here's Why You Should Consider Buying SiteOne Landscape Stock
SiteOne Landscape Supply, Inc. SITE can currently be considered a smart choice for investors seeking exposure in the industrial services industry. Acquisitions, solid product offerings and actions to deal with the pandemic are the major tailwinds for the company.
The Roswell, GA-based company currently sports a Zacks Rank #1 (Strong Buy). It belongs to the Zacks Industrial Services industry, which belongs to the broader Zacks Industrial Products sector.
Below we discussed why it is worth investing in SiteOne Landscape.
Healthy Performance and Top-Line Tailwinds: The company performed well in the last reported quarter, with earnings and sales surpassing estimates by 23.64% and 0.86%, respectively.
The company’s exposure in $20 billion worth of fragmented market — with commercial and residential landscape professionals as its customers — as well as its value-added services, solid distribution network and product offerings will be beneficial for it in the quarters ahead.
Of late, the pandemic-led woes have impacted operations and so the company has withdrawn projections for 2020. But it anticipates gaining strength as restrictions imposed due to the pandemic are being eased. Businesses in commercial and maintenance markets might aid sales.
Liquidity Position and Leverage Position: SiteOne Landscape believes that a healthy liquidity position will help it effectively deal with the difficult environment. On Apr 1, 2020, the company borrowed $100 million under its $375 million ABL facility. Exiting first-quarter 2020, it had $47 million available under its ABL facility and $122 million as cash on hand.
Managing capital expenditure and expenses is being considered by the company for maintaining good liquidity. In first-quarter 2020, its capital expenditure was down by 28% year over year.
In addition, the company’s leverage position improved in first-quarter 2020, with net debt/adjusted EBITDA falling to 3.2x from the year-ago figure of 3.6x. For 2020, it anticipates net debt/ adjusted EBITDA of 2.0-3.0x.
Inorganic Activities: The company has been investing in acquisitions over time. It made four acquisitions in the first quarter of 2020, with revenues (TTM) of $43 million. The buyouts include Wittkopf Landscape Supply, Empire Supplies and The Garden Dept. Corp. in January, while Big Rock Natural Stone and Hardscapes, Inc. was added to the portfolio in March.
In first-quarter 2020, acquired assets boosted the company’s sales by 5% year over year.
Share Price Performance & Earnings Estimates: We believe that impressive financial results must have helped drive sentiments for the stock. Notably, the company’s shares have gained 69.3% in the past three months compared with the industry’s 37.3% growth.
Also, SiteOne Landscape’s earnings estimates have been revised positively in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $1.55 per share for the second quarter, reflecting growth of 28.1% from the 60-day-ago figures. Notably, there are four upward revisions in estimates during the period.
In addition, the consensus estimate for 2020 has been increased by 78% to $2.10 in the past 60 days, while that for 2021 grew by 79.1% to $2.40. Four upward revisions have been recorded for 2020 and 2021 in the past 60 days.
SiteOne Landscape Supply, Inc. Price and Consensus
SiteOne Landscape Supply, Inc. price-consensus-chart | SiteOne Landscape Supply, Inc. Quote
Other Key Picks
Some other top-ranked stocks in the sector are Silgan Holdings Inc. SLGN, MSC Industrial Direct Company, Inc. MSM and TPI Composites, Inc. TPIC. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for the companies have improved for the current year. Further, earnings surprise for the last reported quarter was 16.33% for Silgan Holdings, 2.04% for MSC Industrial Direct and 96.43% for TPI Composites.
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