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Simpson Manufacturing Upgraded to Strong Buy

Zacks Equity Research

On Jun 11, Zacks Investment Research upgraded Simpson Manufacturing Co., Inc. (SSD) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Share price and earnings estimates for Simpson Manufacturing have been undergoing positive revisions since the company reported a massive 150% year-over-year increase in its first-quarter adjusted earnings to 25 cents per share on Apr 25. Results beat the Zacks Consensus Estimate of 16 cents by a margin of 56%. The company has outperformed the Zacks Consensus Estimate in each of the 4 trailing quarters with an average positive surprise of 33.14%.

For 2014, Simpson Manufacturing reiterated its gross margin projection between 44–45%. Effective tax rate will be between 37% and 39% for 2014.

Simpson Manufacturing will benefit from its strategic initiatives, which include a wider offering of concrete construction products, specialty chemicals and wood construction products, particularly truss plate and software offerings. The company’s continued focus on strategic acquisitions to increase its product offering and strengthen its position in different geographic regions also bode well for the future. To support these initiatives, the company expects to hire more personnel and provide additional resources in 2014.

The company will benefit from increased building activity in North America and improved economic conditions in Europe. The Asia-Pacific market segment is witnessing increase in revenue with the recent introduction of repair and strengthening products for the concrete construction segment.

Estimate Revisions

Over the last 60 days, 2 of the 3 estimates available for 2014 and 1 of the 3 available for 2015 underwent positive revisions. Consequently, the Zacks Consensus Estimate for 2014 went up 8% to $1.35 and for 2015, it went up 1% to $1.57.

Other Stocks to Consider

Other stocks in the sector worth considering include United Rentals, Inc. (URI), Gibraltar Industries, Inc. (ROCK) and The New Home Co. LLC (NWHM). While United Rentals and Gibraltar Industries have a Zacks Rank #1 (Strong Buy), The New Home Company carries a Zacks Rank #2 (Buy).

Read the Full Research Report on ROCK
Read the Full Research Report on URI
Read the Full Research Report on SSD
Read the Full Research Report on NWHM

Zacks Investment Research