BofA warns Fed risks policy mistake with early rate cuts
Investing.com - Benchmark maintained its Buy rating and $375.00 price target on TopBuild Corp (NYSE:BLD), a $10.1 billion market cap company with a GREAT financial health score according to InvestingPro, following the company’s acquisition announcement.
On Tuesday, TopBuild announced an all-cash agreement to acquire Progressive Roofing, a commercial roofing installation services leader. The transaction is expected to close later this quarter and establishes a new growth avenue within the highly fragmented, approximately $75 billion adjacent industry. The company’s strong balance sheet, with liquid assets exceeding short-term obligations and a moderate debt level, positions it well for this expansion.
The acquisition rationale centers on increasing TopBuild’s nondiscretionary and non-cyclical revenue drivers. Progressive Roofing generates approximately 70% of its revenue from repair and maintenance services, while about 30% comes from new construction, which creates a steady pipeline of new clients.
Progressive Roofing currently operates only 12 facilities across 8 states, suggesting significant expansion potential for this new business segment. Benchmark believes this acquisition could potentially earn TopBuild a higher growth multiple.
Benchmark plans to update its estimates and price target to reflect the deal upon closing later this quarter, expecting the acquisition to be accretive to earnings and the company’s multiple.
In other recent news, TopBuild Corp. announced its acquisition of Progressive Roofing for $810 million in cash, a move expected to immediately boost the company’s adjusted earnings per share. The acquisition of Progressive Roofing, which reported $438 million in revenue and $89 million in EBITDA for the trailing 12 months, marks TopBuild’s entry into the $75 billion commercial roofing services industry. Both DA Davidson and Loop Capital have maintained their Buy ratings on TopBuild, with price targets set at $395 and $400, respectively, following the acquisition announcement. BofA Securities also raised its price target to $400, citing the strategic alignment of the acquisition with TopBuild’s growth plans.
The acquisition is anticipated to enhance TopBuild’s market presence, given Progressive’s focus on non-discretionary re-roofing and maintenance services, which constitute 70% of its revenue. S&P Global Ratings revised the recovery rating on TopBuild’s senior notes to ’4’ from ’3’, reflecting changes in the company’s capital structure due to a new $1 billion revolving credit facility and a $1 billion term loan. This adjustment indicates lower recovery prospects for unsecured lenders, as the increased priority debt is expected to absorb more recovery value in case of default. The issuer credit rating remains at ’BB+’ with a stable outlook, supported by projected leverage remaining below downside thresholds.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.