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Why Builders FirstSource, Inc. Shares Popped

By Brian Pacampara – Mar 4, 2016 at 11:57AM

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The building products supplier soars on a stellar quarter.

Image Source: Builders FirstSource

What: Shares of building products supplier Builders FirstSource (BLDR -2.54%) were up 13.9% at 11:05 a.m. EST on Friday after its quarterly results impressed Wall Street.

So what: Builders shares have rallied in recent weeks on positive signs heading into the quarter, and solid Q4 results -- breakeven earnings beat the consensus by $0.05 -- only reinforce that bullish sentiment. And while the company's revenue surge of 267% was fueled primarily by its July acquisition of ProBuild, the 150 basis increase in pro forma gross margins gives analysts plenty of good vibes over management's ability to growth profitably as well.

Now what: Management expects steady growth in the homebuilding sector and will continue to reduce its debt load through cash flow generation. "Our company is well positioned to be the building supply company of choice for builders around the country thanks to our geographic reach, enhanced product offerings, national manufacturing capabilities, and superior customer service," said CEO Floy Sherman. "Our focus will be to leverage our national scale and sales capability to grow faster than the market with a focus on profitable growth and value added products." More important, with the shares still off about 40% from their 52-week highs and trading at a forward P/E of about 10, there might be plenty of upside left to buy into that strategy.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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