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Beacon (BECN) Banks on Technology Investments, Expansion

Beacon Roofing Supply, Inc. BECN has been rallying of late. The company has been gaining on strategic initiatives and successful execution of technology initiatives in the growing e-commerce platform.

On this note, this largest publicly-traded distributor of roofing materials recently announced its partnership with the SumoQuote — a fast way to build custom quotes with accuracy, digitally. Per the deal, SumoQuote’s technology will integrate with Beacon’s eCommerce platform, Beacon PRO+, to deliver a streamlined process to build custom quotes. This will help contractors to save time, manage their work more efficiently, and enhance business.

Jonathan Bennett, Beacon’s chief commercial officer, stated, “We are pleased to continue to add digital integrations which are an element of our Ambition 2025 growth plans.”

Strategic Efforts & Technolgy Investment: a Boon

Beacon has undertaken several strategic initiatives to drive its long-term ambition of growing and enhancing customer experience, expanding the top line and margin as well as boosting value for customers, suppliers, employees, and shareholders.

In February 2022, the company unveiled the Ambition 2025 targets, which emphasize its winning culture, operational excellence, above-market growth trajectory and accelerated stockholder value creation. It projects net sales of $9 billion at a CAGR of 8%, adjusted EBITDA of $1 billion at a CAGR of 10%, significant cash flow generation, net leverage of 2.5 times targeted 2025 adjusted EBITDA (resulting in $2.8 billion of investment capacity), and strategic deployment of capital on mergers & acquisitions, growth investments and share repurchases to produce superior returns.

Beacon remains focused on four key strategic initiatives — organic growth, digital, OTC (On-Time and Complete) and branch operating performance — that have been boosting sales and helping improve operating profitability. The company is focused on improving sales and operating performance at exterior and interior branches, and intends to enhance overall customer experience with increased scope and scale of business. With this strategic action, its customers are likely to benefit from the industry’s best e-commerce platform, a new OTC Delivery Network and a newly-designed website. The company’s OTC strategy leverages the density of its branch network and allows serving customers more effectively and efficiently.

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Shares of Beacon have moved up 2.8% so far this year against the industry’s 27.4% fall. Apart from the factors mentioned above, BECN has been rallying on business expansion moves and cost containment strategies.

Recently, Beacon opened some greenfield locations in Texas, which will enable its service to both residential and non-residential customers in the Bryan-College Station and Sherman-Denison markets. These branches are stocked with leading brands of roofing and complementary products, including TRI-BUILT. Contractors in these markets will have immediate access to Beacon PRO+ to manage their business online. The company intends to open approximately 15 such locations this year to support Ambition 2025.

Zacks Rank & Key Picks

Beacon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Yum China Holdings, Inc. YUMC, Sprouts Farmers Market, Inc. SFM and The Wendy's Company WEN.

Yum China sports a Zacks Rank #1. Yum China has a long-term earnings growth of 10%.

The Zacks Consensus Estimate for Yum China’s 2023 sales and earnings per share (EPS) suggests growth of 19.9% and 86.8%, respectively, from the year-ago period’s levels.

Sprouts Farmers Market carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 15.6%, on average.

The Zacks Consensus Estimate for Sprouts Farmers Market’s 2023 sales and EPS suggests growth of 5.9% and 7.9%, respectively, from the year-ago period’s levels.

Wendy's carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 3.9%, on average.

The Zacks Consensus Estimate for Wendy's 2022 sales and EPS suggests growth of 10.4% and 3.7%, respectively, from the year-ago period’s levels.

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