GMS stock price target raised to $95 from $90 at Stephens

Investing.com - Stephens raised its price target on GMS Inc . (NYSE:GMS) to $95.00 from $90.00 on Friday, while maintaining an Overweight rating on the building products distributor. The $3.1 billion market cap company currently trades at $81.01, and according to InvestingPro analysis, the stock is trading near its Fair Value.

The firm cited GMS’s better-than-expected quarterly performance despite a challenging macro environment. Sales declined 5.6% year-over-year but exceeded estimates due to stronger price and volume metrics, along with notable outperformance in the single-family end-market. InvestingPro data shows the company maintains a "GOOD" overall financial health score, with particularly strong marks in profit and price momentum metrics.

GMS reported a gross margin of 31.2% for the quarter, in line with guidance, though down year-over-year primarily due to lower volumes and volume-based incentive income. These factors were partially offset by solid price-cost dynamics, excluding steel.

The company’s adjusted EBITDA margin declined to 8.2%, though this result surpassed expectations. SG&A deleverage impacted margins but was partially mitigated by benefits from cost reduction initiatives.

Stephens expressed encouragement about GMS’s first-quarter fiscal 2026 guidance, which exceeded the firm’s sales estimates and beat adjusted EBITDA expectations. The firm suggested that with a demand trough likely coming into view, "the worst could be behind GMS."

In other recent news, GMS Inc. reported its fourth-quarter fiscal year 2025 results, revealing a mixed financial performance. The company achieved an earnings per share (EPS) of $1.29, surpassing the forecasted $1.11, which represents a 16.22% surprise. However, revenue fell short of expectations, coming in at $1.33 billion compared to the anticipated $1.43 billion, marking a 6.99% miss. Despite the revenue shortfall, GMS Inc. has implemented $55 million in annualized cost savings as part of its ongoing efforts to manage expenses effectively.

The company has been focusing on expanding its product lines and investing in digital infrastructure, positioning itself for future market opportunities. Analysts from various firms have noted the company’s cost management strategies as a positive aspect, with some expressing cautious optimism about its ability to navigate challenging market conditions. GMS Inc. continues to face risks such as economic uncertainty and high interest rates, which could impact market conditions and demand in the building materials sector.

For the upcoming fiscal year 2026, GMS Inc. expects net sales to decline by low to mid-single digits, with adjusted EBITDA projected between $132 million and $137 million. The company aims to maintain margins between 9.5% and 9.8% and generate cash flow equivalent to 60-65% of adjusted EBITDA. Despite current challenges, GMS Inc. remains focused on efficiency and market share growth, with CEO John Turner highlighting potential demand recovery once market conditions improve.

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