Builders FirstSource (BLDR) is a Zacks Rank #5 (Strong Sell) that is a leading supplier of building materials and manufactured components for residential and commercial construction. The company provides a wide range of products, including lumber, drywall, windows, doors, trusses, and roofing materials, as well as offering services like custom-designed building components.
The company faces headwinds from a slowdown in the housing market, higher commodity prices, and potential labor and supply chain issues. Economic uncertainty and inflationary pressures also pose risks to demand for building materials.
The stock has dropped 35% from it's all-time highs, reflecting the above factors, as investors have been selling amid declining analyst estimates.
About the Company
Builders FirstSource was incorporated in 1998 and employs 29,000. The company operates throughout the United States, serving both professional contractors and do-it-yourself (DIY) customers. They are also involved in manufacturing certain components for the construction industry, making them a significant player in the supply chain for construction projects.
BLDR is valued at $15 billion and has a Forward PE of 14. The stock holds Zacks Style Scores of “C” in Growth, but “D” in Momentum. It has an “B” in Value with a Forward PE at 14.
Q4 Earnings
Builders FirstSource delivered a mixed Q4, beating EPS by 3%, but revenue fell short of the $3.91 billion expected. The company continues to navigate market headwinds, including affordability pressures on single-family housing starts and a sluggish multifamily sector.
Adjusted EBITDA declined 28% year-over-year to $494 million, with margins contracting by 360 basis points to 12.9%.
Looking ahead, BLDR is guiding for 2025 revenue of $16.5–$17.5 billion, slightly below consensus estimates of $17.4 billion, with gross margins expected to normalize in the 30–32% range.
Earnings Estimates Falling
Since reporting earnings, estimate have fallen off a cliff.
For the current quarter, numbers have dropped 28%, from $1.90 to $1.36.
Looking at the current year, estimates have declined 18% in that same period, down from $11.65 to $9.55.
For the next year, projections have been adjusted downward by 25% over the last two months, now at $11.12 from $14.73.
Technical Take
The stock is trading at 2025 lows, down about 7% on the year and 23% off the highs. The stock is trading below all moving averages, with the 50-day MA at $151 and 200-day MA at $164.
The 2024 lows at $130.75 look to be tested soon and if selling takes hold under that $130 level, investors need to brace themselves for risk down to the $100 level.
In Summary
Builders FirstSource is facing significant challenges as declining earnings estimates, market headwinds, and technical weakness weigh on the stock.
With shares trading near 2024 lows and further downside risk if key support levels break, investors may want to exercise caution until the housing market stabilizes and earnings trends improve.
For those interested in the construction space, a better option might be Fastenal (FAST). The stock is a Zacks Rank #3 (Hold) that is trading 2025 highs.
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Builders FirstSource, Inc. (BLDR): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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