Beacon Roofing Supply, Inc. BECN is benefiting from the effective implementation of its Ambition 2025 targets and cost-reduction initiatives. The company’s emphasis on expanding through acquisitions, along with investments in digital and productivity enhancements, is expected to support its prospects.
Shares of this largest publicly traded distributor of residential and non-residential roofing materials have gained 17.6% in the past year compared with the Zacks Building Products – Retail industry’s growth of 8.7%. However, the company faces challenges from higher operating and acquisition-related expenses.
The Zacks Consensus Estimate for the company's 2025 earnings has risen to $8.23 per share from $8.19 in the past 60 days. The estimated figure depicts 13.8% growth from the prior year’s reported levels. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
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Let us delve into the factors that highlight why investors should retain this Zacks Rank #3 (Hold) stock.
What Makes the Stock Attractive?
Beacon has implemented several strategic initiatives to drive long-term growth and enhance customer experience. The company aims to expand revenues, improve margins and create value for its customers, suppliers, employees and shareholders.
The company has made significant strides through its Ambition 2025 targets, announced on Feb. 24, 2022. Since Jan. 1, 2022, the company has expanded its geographic footprint by opening 62 greenfield branches. The company has purchased 83 branches from 24 acquisitions as of Sept. 30, 2024. These greenfield and acquired branches contributed $412.7 million and $594.9 million, respectively, to net sales in the first nine months of 2024, showcasing the success of its strategic initiatives. To support these efforts, Beacon expects an investment capacity of $2.8 billion by 2025.
Beacon continues to focus its investments on improving operations, enhancing the digital platform, expanding private label offerings and refining the pricing model to drive performance and ensure long-term growth. In the third quarter of 2024, the gross margin expanded 30 basis points year over year to 26.3%. This marked the fourth consecutive third quarter with a gross margin of 26% or higher, driven by higher prices across all three business segments.
BECN focuses on enhancing productivity and advancing digital initiatives to drive growth and customer engagement. In the third quarter of 2024, digital sales increased approximately 28% year over year and 25.5% in the first nine months. Digital channels remain a competitive advantage, driving larger basket sizes and stronger customer loyalty. Beacon expects digital sales to grow about 25% annually through 2025.
Risks for Beacon Stock
The company has been experiencing higher input costs and continues to face inflationary pressures across most product categories. Despite implementing several cost-saving initiatives and price increases to offset these pressures, the risk posed by rising input costs remains significant. During the first nine months of 2024, adjusted operating expenses increased year over year to $1.38 billion from $1.2 billion reported a year ago. This upside was primarily attributable to acquired branches, as well as higher organic selling, general and administrative expenses.
Stocks to Consider
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
Chipotle Mexican Grill, Inc. CMG presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
CMG delivered a trailing four-quarter earnings surprise of 9.8%, on average. The stock has surged 34.9% in the past year. The consensus estimate for CMG’s 2025 sales and earnings per share (EPS) indicates growth of 12.8% and 17.9%, respectively, from the year-ago period’s levels.
Brinker International, Inc. EAT presently has a Zacks Rank #2. EAT delivered a trailing four-quarter earnings surprise of 12.1%, on average. The stock has surged 237% in the past year.
The consensus estimate for EAT’s fiscal 2025 sales and EPS indicates growth of 9.3% and 44.2%, respectively, from the year-ago period’s levels.
Shake Shack Inc. SHAK currently carries a Zacks Rank of 2. SHAK delivered a trailing four-quarter earnings surprise of 18.3%, on average. The stock has gained 90.5% in the past year.
The Zacks Consensus Estimate for SHAK’s 2025 sales and EPS indicates a rise of 14.7% and 42%, respectively, from the year-ago period’s levels.
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