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Investing.com -- KeyBanc Capital Markets started coverage on building products companies, bullish Builders FirstSource and QXO as top picks while cautious on Pool Corporation.
Builders FirstSource received an Overweight rating and a $145 price target. Analysts said the company’s leading position in a fragmented market, push into higher-margin products, and scale put it in a strong spot to gain market share once U.S. housing demand improves.
Builders FirstSource has been investing in prefabricated components and digital solutions to deepen relationships with builders and boost profitability.
While high interest rates continue to weigh on new home construction, KeyBanc sees the company benefiting from a housing recovery given the undersupply of U.S. homes and aging housing stock.
Pool Corporation was initiated at Sector weight. The analysts said the company’s long-term fundamentals remain solid, supported by its dominant market position and stable replacement demand.
But with shares trading at a premium and interest rates still high, they see limited upside for now.
KeyBanc expects Pool’s margins to hold steady around 30% but said meaningful growth will likely require a pickup in discretionary spending, which depends on rate cuts.
QXO Inc was also rated Overweight with a $28 price target. Analysts called it a “compelling long-term story,” driven by consolidation opportunities in a fragmented $800 billion building products distribution industry and operational improvements under CEO Brad Jacobs.
They expect disciplined acquisitions and technology upgrades to help QXO expand margins and double earnings before interest, taxes, depreciation and amortization (EBITDA) over time.