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Gibraltar Industries’ (ROCK) Rally Continues: Time to Buy?

Zacks

The U.S. construction market is exhibiting an upbeat picture, of late. The space has gained immensely from rise in the GDP numbers, favorable job market scenario, and sturdy business and consumer confidence. Per the U.S. Chamber of Commerce’s Commercial Construction Index, 93% of the total contracts in the country would witness a surge in profit margins by 2019.

Against this backdrop, investors can make the most of this opportunity by betting on top-ranked U.S. construction stocks for booking alluring returns.

Among the numerous potential gainers in the Zacks Construction sector, including Gibraltar Industries, Inc. ROCK to your portfolio will prove a masterstroke investment move. This Zacks Rank #2 (Buy) stock has rallied 15.6% in the last three months, primarily on the back of its unique business strategy and solid revenue prospects.

Why Should You Grab the Stock?

Unique Strategy: Gibraltar Industries has been boosting its competency on the back of the company’s four-pillar value creation strategy. In sync with this program, the company is making well-planned acquisitions, improving operational excellence, advancing technological know-how and undertaking calculated portfolio management moves.

The company is currently improving its operational efficacy by lowering complexity, simplifying product offerings through 80/20 initiatives and adjusting costs.

Under the portfolio management pillar, the company is allocating resources and leadership time to high margin businesses.

Per 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.

Also, the innovation pillar is focused on patenting the products that are developed through acquired product lines or internally within business.

Three years post the implementation of this transformational strategy, Gibraltar Industries has boosted its return on invested capital from 3.9% to 12.6%.

Over the past year, shares of the company have rallied 18.9%, outperforming the sectoral gain of 7.1%.



Revenue Prospects: In first-quarter 2018, Gibraltar Industries' revenues surpassed the Zacks Consensus Estimate by 0.6% and also came in 4.2% higher than the prior-year tally. The company expects that increased demand from industrial, conservation and solar end-markets will improve its top line in the quarters ahead.

The company currently anticipates generating revenues of $257-$267 million in the second quarter and more than $1 billion in 2018.

Per our estimates, the company’s year-over-year sales are projected to be up 4.1% and 3.8% for 2018 and 2019, respectively.

Profitability: Gibraltar Industries pulled off a positive average earnings surprise of 12.12% for the last four quarters. In the first quarter of 2018, the company's earnings grew 30% year over year. We believe the 80/20 simplification initiatives and reduced corporate tax rates will aid in improving the company’s bottom line in the upcoming quarters. The company anticipates earnings of 52-57 cents per share in the second quarter and $1.96-$2.08 per share in 2018.

In the past 30 days, the company’s Zacks Consensus Estimate for earnings has moved up nearly 1% to $2.08 and 0.4% to $2.36 for 2018 and 2019, respectively.

Per our estimates, the company’s year-over-year earnings are projected to be up 21.6% and 13.5% for 2018 and 2019, respectively.

Oher Stocks to Consider

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

Boise Cascade, L.L.C. BCC currently sports a Zacks Rank of #1 (Strong Buy). The company pulled off an average positive earnings surprise of 32.92% over the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Century Communities, Inc. CCS sports a Zacks Rank #1, currently. The company delivered an average positive earnings surprise of 46.36% over the preceding four quarters.

Beazer Homes USA, Inc. BZH holds a Zacks Rank #2. The company recorded an average positive earnings surprise of 177.21% during the same time frame.

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