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Investing.com - William Blair has reiterated an Outperform rating on QXO Inc (NASDAQ:QXO) as merger and acquisition activity accelerates in the building products distribution sector. According to InvestingPro data, this sector has seen increased consolidation by major players like Lowe’s, which currently maintains a robust market capitalization of $144.49 billion.
The firm’s analysis follows Lowe’s recent announcement of a nearly $9 billion deal to acquire Foundation Building Materials (NYSE:FBM), one of the top three players in wallboard distribution. This transaction comes after Home Depot (NYSE:HD)’s acquisition of GMS, another wallboard distributor, in a competitive bidding process that reportedly included QXO and ABC Supply. Lowe’s, currently trading at $257.14 and showing strong financial health according to InvestingPro metrics, appears to be trading above its Fair Value. For deeper insights into M&A activities and comprehensive financial analysis of over 1,400 stocks, including detailed Pro Research Reports, consider an InvestingPro subscription.
William Blair believes consolidation in the sector is intensifying, potentially supporting valuations for larger public distributors. The firm identified four serious buyers for scaled building products distributor assets, with QXO among them.
For QXO’s next potential acquisition, William Blair suggests a lumberyard such as Builders FirstSource (NYSE:BLDR), US LBM, or 84 Lumber remains most likely. The firm also mentioned smaller wallboard distributor assets as possibilities, while noting increased competition might push QXO toward electrical, plumbing, or two-step distribution targets.
William Blair has elevated ADI Global Distribution as a more likely acquisition candidate given its upcoming spin-off from Resideo (NYSE:REZI), and maintains that QXO can achieve revenue of $50 billion by 2035, with a deal announcement expected in the coming months.
In other recent news, Lowe’s Companies Inc (NYSE:LOW). reported its second-quarter 2025 earnings, with adjusted earnings per share (EPS) surpassing analysts’ expectations at $4.33 compared to the forecast of $4.24. Revenue for the quarter aligned with predictions, coming in at $23.96 billion. The company also maintained its full-year guidance, indicating a steady outlook in the home improvement sector. Following these results, Morgan Stanley (NYSE:MS) raised its price target for Lowe’s to $270, citing a positive risk/reward profile, particularly after the company’s acquisition of FBM. Truist Securities also increased its price target to $283, highlighting solid second-quarter results and improved margins. The firm noted that Lowe’s comparable store sales showed improvement, transitioning from a 1% decline in May to a 4.7% increase in July. Truist Securities reiterated a Buy rating on Lowe’s stock, emphasizing the strength in margins. These developments reflect a positive sentiment among analysts regarding Lowe’s recent performance and strategic moves.
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