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On Thursday, Truist Securities revised its price target for GMS Inc . (NYSE: NYSE:GMS), reducing it to $90 from the previous $95, while sustaining a Hold rating on the stock. The adjustment follows the company's EBITDA results, which did not meet the expectations of Wall Street, with the fiscal second quarter of 2025 guidance also falling short of analyst projections.
The underperformance was attributed to weaker-than-anticipated conditions across all end markets, especially noted in July.
The report highlighted that both commercial and multifamily (MF) volume is anticipated to slow for the remainder of the fiscal year. Furthermore, steel framing, which experienced price deflation, has continued to negatively impact the company’s financial results and profit margins. This trend of deflation has been consistent throughout the last fiscal year, with no clear end currently in sight.
Despite these challenges, wallboard pricing has shown some stability or minor increases, but it is believed to have not kept pace with manufacturer price hikes. The analyst from Truist Securities pointed out that, although the sector faces headwinds, anticipated rate cuts may begin to stimulate demand. This outlook is suggested as a key reason why GMS shares only experienced a modest decline following the announcement.
The analyst's commentary emphasized the continued pressure on GMS Inc. due to ongoing price deflation in steel framing and a deceleration in volume growth. However, the potential benefits from interest rate cuts were noted as a factor that could support demand going forward. The revised price target reflects these considerations, with Truist Securities maintaining its Hold rating on GMS Inc. shares.
In other recent news, GMS Inc. reported first quarter fiscal 2025 results that did not meet analyst estimates. The company's adjusted earnings per share stood at $1.93, falling short of the expected $2.14, while revenue rose by 2.8% year-over-year to $1.45 billion, which was also below the anticipated $1.48 billion.
Despite this, GMS experienced growth across all major product categories, including a 4.1% increase in U.S. single-family wallboard organic volume.
However, a 2.3% decline in multi-family and flat commercial demand somewhat offset this growth. The company's CEO, John C. Turner, Jr., attributed these results to steel price deflation and economic tightening, leading to weaker than expected activity levels across all end markets for the quarter. In response to these market pressures, GMS is implementing a $25 million annualized cost reduction program.
In addition to these developments, GMS announced the acquisition of R.S. Elliott Specialty Supply, a Florida-based distributor of stucco and other exterior finishing products. These recent events highlight the ongoing strategic and financial activities within GMS.
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