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On Monday, Loop Capital Markets adjusted its outlook on Builders FirstSource (NYSE:BLDR) shares, reducing the price target to $190 from $205, while still affirming a Buy rating on the stock. The revision follows the company’s latest earnings report, which delivered a mix of higher-than-expected margins but was accompanied by full-year 2025 earnings guidance that fell short of analysts’ predictions. InvestingPro data shows the stock is currently trading slightly below its Fair Value, with analyst targets ranging from $157 to $230, suggesting potential upside despite recent market pressure.
Builders FirstSource reported that its overall sales experienced a high single-digit year-over-year decline in the fourth quarter of 2024, with single-family sales down by 7% and multi-family sales plunging by 29%. Despite these challenges, the company’s gross margin of 32.82% outperformed expectations during the quarter. This was noted as a significant achievement, given the continued normalization of multi-family demand and heightened competitive pressures in distribution. As a prominent player in the Building Products industry, the company maintains strong financial health with a current ratio of 1.77, indicating solid liquidity. InvestingPro subscribers can access 13 additional key insights about BLDR’s market position and financial strength.
The company issued its full-year 2025 adjusted EBITDA guidance, projecting between $1.9 billion and $2.3 billion, which did not meet the midpoint of consensus estimates. Builders FirstSource’s sales guidance for the year, ranging from $16.5 billion to $17.5 billion, is based on the assumption of flat year-over-year single-family housing starts and a mid-teen percentage decrease in multi-family starts. The company’s current trailing twelve-month EBITDA stands at $2.16 billion, with a P/E ratio of 13.06x suggesting relatively attractive valuation metrics compared to industry peers.
The stable guidance for single-family housing starts in 2025 did not come as a surprise to Loop Capital. The firm acknowledged that residential construction expectations have been tempered due to an increase in new housing inventory, declining builder sentiment, and persistently high interest rates.
Despite the tempered outlook, Loop Capital views Builders FirstSource as a preferred early-cycle investment opportunity in anticipation of a rebound in residential sentiment. The firm cites the company’s significant exposure to single-family residential markets and its ability to maintain strong margins during periods of pronounced multi-family demand declines as key reasons for their continued endorsement of the stock.
In other recent news, Builders FirstSource has experienced a series of adjustments in its stock price targets from various financial analysts. Stifel has lowered its price target to $156 while maintaining a Buy rating, citing a $2.1 billion EBITDA estimate for fiscal year 2025 and emphasizing the need for positive trends in the residential construction sector. Jefferies also reduced its price target to $180, following Builders FirstSource’s strong fourth-quarter 2024 performance, which included an adjusted EBITDA of $65.2 million, surpassing consensus estimates by 26%. Despite the cut, Jefferies continues to hold a Buy rating, suggesting potential upside based on the company’s guidance for 2025.
BMO Capital Markets has adjusted its price target to $168, maintaining a Market Perform rating, due to uncertainties in the housing market and potential risks such as pricing competition and shifts in consumer preferences. However, BMO acknowledges Builders FirstSource’s strong balance sheet and capable management as positive factors. Meanwhile, Benchmark has set a new price target of $170, down from $200, but still supports a Buy rating. This adjustment follows Builders FirstSource’s robust financial results in the fourth quarter, where it exceeded expectations in EBITDA and earnings per share, despite a slight revenue miss.
The company has been active in mergers and acquisitions, securing approximately $420 million in annual revenue for fiscal year 2024. These developments reflect a cautious yet optimistic perspective from analysts regarding Builders FirstSource’s ability to navigate current market challenges and capitalize on strategic opportunities.
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