Beacon Roofing Down to Neutral

Beacon Roofings fourth-quarter 2012 earnings came in at 60 cents per share, in line with the Zacks Consensus Estimate. Earnings increased 7% annually, attributable to higher sales on the back of accretive acquisitions and gross margin expansion; offset by higher operating expenses. Revenues increased 4% to $598 million, falling short of the Zacks Consensus Estimate.

In fiscal 2012, adjusted EPS surged 44% year over year to $1.67, helped by higher sales and gross margins, somewhat offset by higher operating expenses and a higher income tax provision. EPS was in line with the Zacks Consensus Estimate. Total revenue increased 12% year over year to $2.04 million, in line with the Zacks Consensus Estimate.

The company primarily benefited from increased re-roofing activities in the first half of fiscal 2012. Traditionally, over 70% of expenditures in the roofing market are for re-roofing projects. Re-roofing projects are generally considered maintenance and repair expenditures and are less likely to be postponed during periods of recession or slow economic growth compared to new construction projects. Driving the demand for re-roofing is an aging U.S. housing stock. Over 60% of the U.S. housing stock was built prior to 1980, with the median age of U.S. homes is over 35 years. Furthermore; weather damage homeowners looking to upgrade their homes, and sales of existing homes are also driving demand.

U.S. residential construction is finally stabilizing and is on the road to a much-awaited recovery, which bodes well for the Beacon Roofing. Housing starts have improved throughout 2012 with both housing starts and building permits attaining a 4-year high in September.

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Beacon Roofing Down to Neutral