Reasons to Buy Installed Building Products (IBP) Stock Now
Installed Building Products, Inc. IBP is poised to gain from favorable pricing strategies, geographic and product diversification strategies, as well as solid acquisitions. Shares of this residential insulation installer have rallied 14.5% over the past three months against the Zacks Building Products - Miscellaneous industry’s 11.3% decline.
Earnings estimates for 2022 have increased to $7.25 from $7.17 in the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #2 (Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Adding IBP’s stock to the portfolio will not disappoint investors as it possesses a solid VGM Score of A, along with a strong earnings growth rate.
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Let us delve deeper into other factors that make this stock a profitable pick.
What Makes the Stock an Attractive Pick?
Acquisitions
Acquisitions are an important part of Installed Building Products’ growth strategy, leading to diversification of its geographies, end markets and products. The company maintains a robust pipeline of acquisition candidates that takes into account geographic expansion in the core residential insulation end market, and acquisition opportunities that help in the continuation of end-market as well as end-product diversification strategy. For 2022, the company expects to acquire at least $100 million in revenues.
During the first three months of 2022, IBP completed two business combinations. In May 2022, it announced the acquisition of Statewide Insulation, Inc., doing business as Tri-County Insulation and Acoustical Contractors. In April 2022, IBP acquired Central Aluminum Supply Corporation, a Trenton, NJ-based distributor of gutter supplies and accessories to residential, multifamily, and commercial markets.
Higher Earnings Growth Rate
Earnings growth is also a key factor in stock valuation. The Zacks Consensus Estimate for 2022 earnings of $7.25 per share indicates 33.3% year-over-year growth. The solid growth rate depicts the stock's promising future.
Higher Return on Equity (ROE)
Installed Building Products’ trailing 12-month ROE is indicative of growth potential. ROE for the trailing 12 months is 45.8%, much higher than the industry’s 12.3%, which reflects the company’s efficient usage of shareholders’ funds.
Rewarding Shareholders
The company has been consistently driving shareholder value by returning cash to shareholders through regular share repurchases and dividend payments. During first-quarter 2022, IBP returned $85.3 million to shareholders through dividends and share repurchases.
Meanwhile, IBP’s board of directors has approved its quarterly cash dividend of 31.5 cents per share. This second-quarter regular cash dividend represents a 5% increase from last year’s second-quarter cash dividend payment.
Other Top-Ranked Stocks in the Construction Sector
Primoris Services Corporation PRIM, currently carrying a Zacks Rank #1, provides a wide range of construction, fabrication, maintenance, replacement and engineering services.
PRIM’s 2022 earnings are likely to rise 19.4%. The company’s earnings estimates have increased to $2.59 from $2.49 per share over the past 60 days.
KBR, Inc. KBR, currently carrying a Zacks Rank #2, provides scientific, technology, and engineering solutions to governments and commercial customers. Its mission-critical government services, high-end and differentiated government business work, strong margin performance, proprietary technology solutions and a significant increase in backlog (particularly in Government Solution) are expected to boost 2022 earnings.
KBR’s 2022 earnings are likely to rise 7.9%. The company has seen a 0.4% upward estimate revision for 2022 earnings in the past 60 days.
AECOM ACM, currently carrying a Zacks Rank #2, provides professional, technical and management solutions to diverse industries across end markets like transportation, facilities, government and environmental, energy and water businesses.
AECOM’s expected earnings growth rate for 2022 is 21.6%. The consensus mark for its 2022 earnings has moved up to $3.43 per share from $3.40 in the past 60 days.
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