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What: Shares of Beacon Roofing Supply
So what: Revenue grew 10.1% from the year-ago quarter, helped by acquired revenue and organic improvement in commercial and complementary businesses. Earnings also got a nice boost from a 38% reduction in interest expense.
Now what: Positives include stronger demand in the nonresidential market, potential for earnings to continue getting a boost from lower interest expense, and a statement from the company that it is optimistic about the coming three quarters. On the downside, better demand merely reflected lousy demand last year, EBITDA grew only 2.5%, and operating margin deteriorated slightly despite the revenue growth. Earnings estimates are likely to go up but not enough to justify the 20.0 P/E ratio on earnings for the coming year (at a price of $20.96), providing a profit-taking opportunity for current stockholders.
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