Can Infrastructural Push Sustain Growth for Gibraltar (ROCK)?
Gibraltar Industries Inc. ROCK is excellently positioned to reap the rewards of its well-established Three-Pillar growth strategy and the promising outlook of its Infrastructure segment.
With an enhanced supply of solar modules, growing volume, and supply-chain optimization efforts, coupled with cost-effective material management, improved field operations efficiency, favorable business mix, and the implementation of the 80/20 initiatives, the company is poised for success.
Shares of Gibraltar have gained 52.3% year to date, outperforming the industry’s 26.9% rise. The Zacks Consensus Estimate for 2023 earnings per share (EPS) of $3.97 moved up from $3.76 in the past 30 days. The upside is supported by its solid VGM Score of A, along with a Growth Score of A. The solid price performance and analysts’ optimistic view testify that Gibraltar — a Zacks Rank #1 (Strong Buy) stock — has excellent growth potential in the long run.
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Let’s delve deeper into the major driving factors.
Infrastructure Prospects: The Infrastructure segment is benefiting from increased demand for non-fabricated products. Solid visibility on State Departments’ transportation federal funding bidding activity is encouraging. The company expects to see spending increases as the states take advantage of the additional funding available through the infrastructure investment in Jobs Act in 2023.
During the second quarter of 2023, sales in the segment rose 12.6% year over year to $24.2 million. The adjusted operating margin of 24.1% expanded by a whopping 1,070 basis points (bps) year over year. The adjusted EBITDA margin also expanded 1,030 bps from the prior-year quarter to 27.6%. Backlog rose 46.1% year over year on strong end markets demand, depicting solid potential ahead.
Thee-Pillar Strategy: Gibraltar is progressing well, operationally and financially, on the back of its Three-Pillar growth strategy. The strategy is focused on three core tenets - Business Systems, Portfolio Management and Organizational Development. The first pillar, i.e., Business Systems, combines two of its previous strategic pillars, namely, operational excellence and product innovation. The second strategic pillar comprises Portfolio Management and Acquisitions. Through this pillar, the company is focused on optimizing its business portfolio. Lastly, the third pillar of the strategy is Organizational Development. The Organizational Development primarily focuses on talent development, design and structure of the organization.
Upbeat View: In light of the strong first-half performance in 2023 and the company's optimistic outlook for the second half of the year, ROCK has revised its adjusted EPS guidance upward between 12% and 13%. Additionally, the company has reaffirmed its net sales outlook and anticipates the continuation of robust cash flow generation.
The Zacks Consensus Estimate for EPS of $3.97 and $4.51 for 2023 and 2024 indicates 16.8% and 13.6% year-over-year growth, respectively.
Higher ROE: Gibraltar’s trailing 12-month return on equity (ROE) is indicative of its growth potential. The company’s ROE of 13.9% compares favorably with the industry’s 6.8%, which signals more efficiency in using shareholders’ funds than peers.
Other Key Picks
Some other top-ranked stocks from the Construction sector are EMCOR Group, Inc. EME, TopBuild Corp. BLD and Fluor Corporation FLR.
EMCOR currently sports a Zacks Rank of 1. EME delivered a trailing four-quarter earnings surprise of 17.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of EME have risen 85.2% in the past year. The Zacks Consensus Estimate for EME’s 2023 sales and EPS indicates growth of 11.5% and 35.9%, respectively, from the previous year’s reported levels.
TopBuild currently sports a Zacks Rank of 1. BLD delivered a trailing four-quarter earnings surprise of 14.1%, on average. Shares of the company have risen 55.4% in the past year.
The Zacks Consensus Estimate for BLD’s 2023 sales and EPS indicates growth of 3.3% and 6.1%, respectively, from the previous year’s reported levels.
Fluor currently sports a Zacks Rank of 1. FLR delivered a trailing four-quarter negative earnings surprise of 5.3%, on average. Shares of the company have gained 35.1% in the past year.
The Zacks Consensus Estimate for FLR’s 2023 sales and EPS indicates growth of 11.3% and 141.5%, respectively, from the previous year’s reported levels.
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