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On Friday, Truist Securities revised the price target for GMS Inc . (NYSE:GMS) shares, reducing it to $80 from the previous target of $97, while keeping a Hold rating on the stock. The adjustment followed GMS’s intraday stock decline of 7%, compared to a 2% drop in the S&P 500, as the company’s EBITDA results and forecast for the fourth fiscal quarter of 2025 (April) fell significantly short of market expectations, indicating considerable year-over-year downturns.
Keith Hughes of Truist Securities expressed concern over the company’s outlook on the end-user market, particularly in multifamily (MF) housing, which was anticipated to be weak. However, the outlook also encompassed an unexpectedly pessimistic view on single-family (SF) and non-residential construction sectors. Despite these challenges, InvestingPro analysis shows GMS maintains a "GOOD" overall financial health score, with liquid assets exceeding short-term obligations and a healthy current ratio of 2.3. This perspective is notably the most bearish seen in earnings reports to date.
The ongoing challenges in the wallboard distribution segment were highlighted as a contributing factor to the company’s performance issues. Distributors continue to struggle with price and cost dynamics, remaining "behind the cost curve." This has been a persistent drag on the sector, and GMS’s recent results mirror the difficulties faced by its competitors.
The report from Truist Securities indicated that it is uncertain whether the management’s view of the end-user market is overly conservative. However, given the similar results observed among competitors, the firm decided to maintain its Hold rating on GMS stock, albeit with a reduced price target, reflecting the less optimistic outlook and current industry challenges.
In other recent news, GMS Inc. reported its fiscal third-quarter 2025 earnings, where the company exceeded expectations with an EPS of $1.70 compared to the forecasted $1.61. However, revenue fell slightly short, reaching $1.3 billion against an anticipated $1.31 billion. This revenue miss reflects the challenging market conditions, particularly in the construction sector, which significantly impacted GMS’s financial performance. DA Davidson responded to these results by lowering its price target for GMS from $94.00 to $80.00, while maintaining a Neutral rating on the stock. The firm highlighted concerns over the company’s decreased margins and the unpredictability of forecasting under current conditions. GMS’s adjusted EBITDA for the quarter was $93 million, marking a 27.3% decrease year-over-year. The company’s gross margin also saw a decline, dropping from 33% to 31.2%. Despite these challenges, GMS remains optimistic about market recovery in the coming quarters and has initiated cost reduction measures to better align with current market realities.
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