Builders FirstSource Stock builds a base

Building materials supplier Builders FirstSource (NASDAQ:BLDR) stock has relied on the bear market for the past month as shares have fallen (-20%) year-to-date. Rising interest rate headwinds are cooling consumer mortgage applications, but there is still a housing shortage that will fuel housing demand. Economic uncertainty from inflationary pressures, supply constraints, logistical disruptions and the conflict in Russia in Ukraine is still not impacting housing construction as the secular tailwind continues. Commodity inflation and pricing discipline coupled with robust housing demand propelled the company to a record adjusted EBITDA of $1 billion on a record $6 billion in sales in the first quarter of 2022. The company blew its top and net profit in fiscal Q1 of 2022 and increased forward guidance in addition to authorizing a $2 billion share repurchase. The shares are trading at 5.42X future earnings. Cautious investors looking for indirect exposure to the housing market can look forward to opportunistic pullbacks in Builders FirstSource stocks. – MarketBeat

Q1 Fiscal 2022 Profit Release

On May 10, 2022, Builders released its fiscal results for the first quarter of 2021 for the quarter ended October 2021. The company reported earnings per share (EPS) of $3.90, better than consensus analyst estimates for an earnings of $3.90. $2.02, a profit of $1.88. Revenues were up 36.1% year-over-year (year-on-year) to $5.68 billion, surpassing consensus analyst estimates of $4.69 billion. Adjusted EBITA rose 119.8% to a Q1 record $1 billion, driven by commodity inflation, double-digit core organic growth and a robust housing market. The company had a net debt-to-LTM-adjusted EBITDA ratio of 0.9X and liquidity of $1.2 billion. The company bought back 3.6 million shares for $286 million. The board of directors approved a new $2 billion share repurchase program. The company sees growth across all geographies in the fiscal full year 2022, with single-family entry in the middle single digits, multifamily in the low to mid single digits and R&R in the low to mid single digits. Free cash flow in the $2 billion to $2.4 billion range, assuming average commodity prices in the $700 to $1,000 range.

Takeaway for conference calls

David Flitman, CEO of Builders, noted that the company entered 2022 with record net sales, gross margin and adjusted EBITA with strong organic sales growth of 15%. The company continues to invest in operations despite significant supply chain constraints. The blowout in the first quarter of 2022 had an adjusted EBITDA margin of 17.6%. The company focuses on tuck-in mergers and acquisitions, of which there are more than 1,000 candidates with revenues of less than $100 million. So far, the company has made seven acquisitions in the past year for $1.2 billion. Builders expects to spend approximately $500 million on mergers and acquisitions this year. On April 1, 2022, the company acquired Paul Truss, a supplier of construction components for single-family and multi-family homes with seven locations in South Carolina, Georgia and Texas, with sales of $138 million last year. It also acquired Valley Truss of Boise, Idaho, which also supplies construction components to single-family and multi-family homes with nearly $26 million in 2021 sales. The company continues its digital transformation with the continued successful implementation of Paradigm Estimate to provide faster and more accurate customer quotes. The company has completed more than 2,000 estimates for customers in nine states as momentum continues to accelerate. He added: “In addition, this process provides a foundation for our configurable visualization technology and improved design and construction efficiencies for home builders. As for our visualization technology, I am pleased to announce that we have signed an agreement with Hayden Homes, a builder in the Pacific Northwest, to leverage our Homebuilder Omni platform. With their plans of approximately 2,000 starts, Hayden Homes will become the largest builder currently using our digital solutions. We believe we are making the necessary investments to create a ​revolutionize our industry and that our digital strategy is on track to capture a $1 billion growth opportunity by 2026.”

BLDR Opportunistic Pullback Levels

Using the gun charts on the weekly and daily time frames provides an accurate, short-term view of the price action playing field for BLDR stocks. The weekly gun chart peaked near the Fibonacci (fib) level of $71.41 before falling to the $57.52 fib before rallying. The weekly gun chart is on a make or break with a rising 5-period moving average (MA) at $64.23 and 15-period MA at $67.13 with a 50-period rising MA at $62.16. The weekly lower Bollinger Bands (BBs) begin to compress at $53.22, while the upper BBs fall at $82.19. The weekly stochastic has a mini pup through the 30 band setting up a make or break with the possible bearish inverse pup breakdown if the weekly 5 period MA support breaks. The weekly market structure low (MSL) triggers a breakout to $66.83. The daily gun chart is consolidating into a tightening range as the daily 5 period climbs to $63.36 to attempt a crossover break through the 15-period MA at $64.14 and the 200-period MA at $ 65.79, enabled by the rising stochastic to 40 band. The daily upper BBs sit at $70.79 and lower BBs at $58.20. Cautious investors can watch for opportunistic pullback levels on the $63.56 fib, $61.91 fib, $60.25 fib, $58.96 fib, $57.59 fib, $54.51 fib, $50, 59 fib and the $45.54 fib level. Upward trajectories range from the $75.59 fib level to the $84.14 fib level.

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