JPMorgan cuts TopBuild stock price target to $393

On Monday, JPMorgan analysts adjusted their outlook on TopBuild Corp (NYSE:BLD), reducing the price target to $393 from the previous $470 while maintaining an Overweight rating. Currently trading at $308.64, near its 52-week low of $288.31, TopBuild’s stock has shown significant volatility this year. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.19 out of 5, despite 9 analysts recently revising their earnings estimates downward. The revision follows the company’s fourth-quarter earnings call and 2025 guidance, which indicated a potential decrease in year-over-year revenue and adjusted EBITDA.

TopBuild’s revenue for 2025 is now projected to range between $5.05 billion and $5.35 billion, representing a decrease of up to 5% from the previous year, as opposed to JPMorgan’s earlier estimate of a 5% increase to $5.61 billion. This projection aligns with InvestingPro’s forecast of a 2% revenue decline for FY2025. Adjusted EBITDA expectations have also been moderated to $925 million to $1.075 billion, down from JPMorgan’s initial forecast of $1.151 billion and below the Street’s expectation of $1.102 billion. For deeper insights into TopBuild’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

The company anticipates a mid single-digit decline in residential sales and a low single-digit increase in commercial sales. Price/mix is expected to fall slightly, continuing the trend from the fourth quarter into 2025. TopBuild has experienced improved fiberglass availability due to softening housing demand, and while manufacturer price increases were announced in January, they have not gained traction.

TopBuild is engaging with builders on price negotiations, particularly within its distribution segment, and although installation remains profitable, there has been some labor pressure as volume decreases. The company’s M&A pipeline remains robust, offering potential to expand its market reach.

For the fourth quarter, TopBuild reported a 2% increase in sales, aligning with JPMorgan’s estimates, and operating margins improved to 16.7%, slightly above expectations despite a decrease in gross margins compared to the previous year. JPMorgan has subsequently lowered its EBITDA estimates for 2025 and 2026 to $1.03 billion and $1.11 billion, respectively.

The new price target of $393 is based on an approximately 11x target EV/EBITDA multiple against JPMorgan’s 2026 EBITDA estimate, a slight decrease from the previously used 11.5x multiple. This adjustment reflects a balance between TopBuild’s strong fundamental execution, M&A growth opportunities, and the anticipated continued softness in residential demand. Despite these challenges, JPMorgan reaffirms its Overweight rating, citing TopBuild’s attractive valuation, execution capabilities, and solid financial position. The company’s strong fundamentals are reflected in its healthy current ratio of 2.08 and moderate debt levels, with a debt-to-equity ratio of 0.71. InvestingPro analysis reveals additional positive factors, including management’s aggressive share buybacks and high shareholder yield, with 13 more exclusive ProTips available to subscribers.

In other recent news, TopBuild Corp. reported fourth-quarter earnings that exceeded analyst estimates, with adjusted earnings per share reaching $5.13, surpassing the consensus of $5.03. Revenue for the quarter rose by 2% year-over-year to $1.31 billion, aligning with expectations. However, the company’s 2025 revenue guidance fell short of Wall Street projections, with an anticipated range of $5.05 billion to $5.35 billion, below the $5.465 billion consensus. In a strategic move, TopBuild announced its acquisition of Seal-Rite Insulation, a company generating $15 million in annual revenue, expected to finalize in the second quarter of 2025.

Analyst firms have adjusted their price targets for TopBuild, with DA Davidson lowering it to $435 while maintaining a Buy rating, and Benchmark reducing it to $375 but also retaining a Buy rating. Truist Securities decreased its price target to $310, maintaining a Hold rating, citing potential EBITDA contraction in 2025. Despite these adjustments, analysts from DA Davidson and Benchmark remain optimistic about TopBuild’s strategic positioning and financial health. TopBuild’s recent acquisitions and share repurchase program, with a new $1 billion authorization, underscore its commitment to growth and shareholder value. These developments highlight the company’s ongoing efforts to navigate market conditions and enhance its service offerings.

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