Why Builders FirstSource's Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Builders FirstSource (NASDAQ: BLDR  ) jumped 11% today after the company released earnings.

So what: Sales were up 38.1% from a year ago to $402.9 million, the eighth straight quarter year-over-year growth has been over 30%. Net income swung from a loss of $13.6 million a year ago to a $12.6 million profit, or $0.13 per share.  

Now what: The company's operations are improving across the board, with gross margins up and SG&A costs down as well. If the housing market continues to improve I think the company's results will follow, although it's just barely swinging to a profit. The stock is trading at 20 times forward estimates, but management has crushed those estimates the last two quarters, which is why I think the stock still has plenty of room to run.

Economic growth driving stocks
Builders FirstSource is benefiting from the macro improvement in housing, but that's not the only big trend investors should be looking at. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!


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8/28/2014 3:59 PM
BLDR $6.85 Down -0.03 -0.44%
Builders FirstSour… CAPS Rating: **

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