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Reasons That Make Gibraltar a Solid Investment Pick Now

Zacks

With the Q1 earnings season just around the corner, investors are eagerly waiting for the financial results of popular stocks.

Our latest Earnings Preview (dated Apr 6, 2018) states that the robust momentum witnessed in the prior earnings season will continue into the first quarter as well. Overall earnings of the S&P 500 index is predicted to be up 16% year over year on 7.4% rise in revenues.

While reckoning the performance of construction stocks, we believe upbeat consumer confidence, increased percentage of U.S. housing starts & building permits, impressive labor-market scenario, reduced corporate tax rates and stronger infrastructure spending will likely propel near-term growth. Notably, aggregate U.S. construction spending was $1,273.1 billion in February, up 3% from the year-ago tally.

Per our latest preview, first-quarter 2018 earnings and revenues of the construction stocks in the S&P 500 group are projected to climb 36.1% and 15.9%, respectively, year over year.

Among the numerous potential gainers within the sector, adding Gibraltar Industries, Inc. ROCK to your portfolio would be a promising investment move.

Over the last six months, this Zacks Rank #2 (Buy) stock has yielded 4.5%, outperforming 4% growth recorded by the industry.

Notably, the attractiveness of this stock as a current investment choice is further accentuated by its favorable VGM Score of B.

Reasons for the Solid Run

Exclusive Business Strategy: Gibraltar Industries intends to boost its near-term revenues and profitability on the back of the company’s four-pillar value creation strategy. Under this, it has been strengthening its competency on the back of well-planned acquisitions, stronger innovation, greater operational efficacy and calculated portfolio-management moves. Three years post implementation of this transformational strategy, the company has boosted its return on invested capital from 3.9% to 12.6%.

Notably, the company is currently improving its operational efficacy by lowering complexity, simplifying product offerings through the 80/20 initiatives and adjusting costs. In 2018, it intends to improve its operating characteristics by implementing certain market rate of demand replenishment and in-lining projects.

Under the portfolio-management pillar, Gibraltar Industries allocates its resources and leadership time to businesses enjoying maximum growth potential.

Under the acquisition pillar, the company’s current target markets for buyouts are residential building products, post & parcel solutions, renewable energy and conservation, perimeter security and infrastructure.

Per the innovation pillar, Gibraltar Industries is focused on patenting products that are developed through acquired product lines or produced internally within business. In 2017, roughly 7% of the company’s total revenues were generated from sales of innovative products, up from the 4% secured in 2014.

Top-Line Prospects: Stronger demand for centralized mail-system solutions, building products and electronic package lockers is anticipated to drive Gibraltar’s revenues in the quarters ahead. Notably, the company believes the Package Concierge buyout (February 2017) will fortify its Residential segment over the long run.

On the other hand, elevated demand for solar tracking solutions will likely bolster near-term revenues of the company’s Renewable Energy and Conservation segment.

The company anticipates reporting revenues within $213-$220 million in first-quarter 2018 and more than $1 billion for 2018.

As per our in-house projections, Gibraltar Industries’ revenues will likely be up 4% in 2018 and 3.9% in 2019.

Bottom-Line Prospects: Gibraltar pulled off a positive average earnings surprise of 13.04% over the last four quarters.

The company intends to improve its profitability on the back of stronger revenues and greater operational efficacy.

Furthermore, reduced corporate tax rates (on account of the Tax Cuts and Jobs Act implementation) are expected to improve its near-term bottom-line performance. Notably, Gibraltar Industries secured a benefit of 39 cents per share from the corporate tax adjustment.

Over the last 60 days, the Zacks Consensus Estimate for Gibraltar Industries’ earnings has moved up 15.1% to $2.06 for 2018. The positive earnings estimate revisions indicate upbeat market sentiment and substantiate the Zacks Rank #2 for the stock.

Notably, as per our in-house projections, Gibraltar Industries’ earnings will likely improve 20.5% in 2018 and 14.1% in 2019.

Other Stocks to Consider

Some other top-ranked stocks in the same space are listed below:

BELLWAY BLWYY sports a Zacks Rank of 1 (Strong Buy). The company’s EPS is predicted to be up 9.8% in the next three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

NCI Building Systems, Inc. NCS also flaunts a Zacks Rank #1. The company’s EPS is projected to rise 10% over the next three to five years.

Patrick Industries, Inc. PATK sports a Zacks Rank of 1. The company’s EPS is estimated to grow 11.4% during the same time frame.

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