On Tuesday, B.Riley analyst upgraded the price target for Builders FirstSource (NYSE:BLDR) to $220 from $187, maintaining a Buy rating on the stock. This adjustment follows the company's third-quarter 2024 earnings release, which demonstrated resilience amid a fluctuating housing market.
Builders FirstSource reported its quarterly results on Monday (NASDAQ:MNDY), revealing that while revenue was slightly below expectations, adjusted EBITDA and earnings per share surpassed consensus, buoyed by gross margins that exceeded forecasts.
The company's value-added products and services have been instrumental in achieving higher margins, distinguishing Builders FirstSource from competitors, leading to market share gains and more robust customer relationships.
The company has also refined its adjusted EBITDA guidance for 2024, narrowing it at the midpoint, and has increased its free cash flow projections. In response to these outcomes, B.Riley has raised its adjusted EBITDA and EPS estimates for 2024 and 2025.
The analyst's confidence is growing that the company is close to reaching the lowest point in gross margin declines.
Anticipated tailwinds, including potential changes in interest and mortgage rates, increased spending on renovation and remodeling, and an expected upswing in multifamily unit demand in the second half of 2025, combined with stable or improving commodity prices, are seen as positioning Builders FirstSource for growth in 2025.
In other recent news, Builders FirstSource reported its Q3 earnings and revenue results, with a mixed outcome. The company posted adjusted earnings per share of $3.07, surpassing the consensus estimate of $2.96. However, revenue fell short, declining by 6.7% year-over-year to $4.2 billion, missing analyst projections of $4.44 billion.
As a result of these developments, Builders FirstSource has revised its full-year outlook, now expecting its 2024 revenue to be between $16.25-16.55 billion, a decrease from the previously anticipated $16.85 billion. Adjusted EBITDA is now projected to be between $2.25-2.35 billion, with margins ranging from 13.8-14.2%.
In other company news, Builders FirstSource repurchased 0.9 million shares for $159.7 million in Q3 and completed six acquisitions to enhance its value-added products strategy.
DA Davidson maintained a Neutral rating on the company but raised the price target to $175 from $169, reflecting the company's recent performance, including gross margins surpassing expectations.
These are the latest developments for Builders FirstSource.
InvestingPro Insights
Builders FirstSource's recent performance and B.Riley's upgraded price target align with several key metrics and insights from InvestingPro. The company's market cap stands at $20.91 billion, reflecting its significant presence in the Building Products industry.
InvestingPro data shows that Builders FirstSource has been profitable over the last twelve months, with a P/E ratio of 16.85. This profitability is consistent with the company's strong performance noted in the article, particularly its ability to exceed adjusted EBITDA and EPS expectations.
Two relevant InvestingPro Tips highlight the company's financial strength and market performance. Firstly, "Liquid assets exceed short term obligations," indicating a solid financial position that supports the company's ability to navigate market fluctuations. Secondly, "Strong return over the last three months" (with a 16.22% price total return) aligns with the positive outlook expressed in the analyst's upgrade.
It's worth noting that InvestingPro offers 11 additional tips for Builders FirstSource, providing investors with a more comprehensive analysis of the company's prospects and challenges. These insights could be particularly valuable given the company's position in the dynamic housing market.
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