Beacon's New Buy in Pennsylvania

Beacon Roofing Supply Inc. (BECN) recently completed the acquisition of Braddock, Pennsylvania-based McClure-Johnston Company, a distributor of residential and commercial roofing products and related accessories. McClure-Johnston has a presence in 14 locations - eight in Pennsylvania, three in West Virginia, one in Western Maryland and two in Georgia.

Total revenue increased 4% year over year to $560.5 million, benefiting from acquisitions. However, reported revenue lagged the Zacks Consensus Estimate of $584 million. Organic growth declined 1.5% in the quarter.

Beacon Roofings growth strategy includes both internal growth through opening branches, growing sales with existing customers, adding new customers and introducing new products as well as through acquisitions. Since 1997 through 2011, the company has made 25 strategic and complementary acquisitions. Its main acquisition strategy is to target market leaders in geographic areas that it does not have a presence. Beacon Roofing also acquires companies to supplement branch openings within existing markets.

Furthermore, over 70% of expenditures in the roofing market are for re-roofing projects, with the balance being for new construction. 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. As a result, demand for roofing products is less volatile than overall demand for construction products. Demand for re-roofing is also on the rise providing ample scope for Beacon to expand in this market.

U.S. residential construction is finally stabilizing and is on the road to a much-awaited recovery, which bodes well for the Beacon Roofing. Furthermore, the company will stand to benefit from the rebuilding and repair activities following the devastating Hurricane Sandy.

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Beacon's New Buy in Pennsylvania