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GMS Buys Hart Acoustical & Drywall Supply, Enhances Presence

GMS Inc. GMS recently announced that it has acquired acoustical and drywall operations of San Antonio, TX-based J.P. Hart Lumber Company, commonly known as Hart Acoustical & Drywall Supply or HADS. HADS will become part of the company’s subsidiary business, Lone Star Materials, Inc. (“Lone Star”), and be fully transformed into the Lone Star brand.

Through its two existing locations in San Antonio and La Feria, HADS offers drywall, metal studs, insulation and ceiling tiles. The deal will bolster Lone Star’s South Texas presence.

GMS has been improving performance and expanding footprint through strategic acquisitions over the past several years. On Mar 4, 2019, the company acquired the assets of Commercial Builders Group, LLC (“CBG”), an interior building products distributor, in LaPlace, LA.

Additionally, in 2018, it acquired Paramount, CA-based Charles G. Hardy (“CGH”) and Canada’s largest gypsum specialty dealer, WSB Titan (“Titan”).

The company has been solidifying geographic scale with these buyouts. Also, it is seeking disciplined growth through expansion in existing and new markets by opening new branches, as well as acquiring competitors. In this regard, the company opened four new greenfield locations in the first nine months of fiscal 2019.

Importantly, these acquisitions added $339.6 million to its total net sales in the said period.

Coming to price performance, shares of GMS have outperformed the industry and S&P 500 Composite so far this year. The stock has gained 21.4% compared with the industry and S&P 500 Composite’s growth of 7.5% and 9%, respectively, in the said period.

The company’s solid price performance is mainly driven by strong end-markets results, backed by improvement in new housing starts, R&R activity and commercial construction. Also, its market-leading position, particularly in the distribution of interior building products, adds to the positives.

Zacks Rank & Key Picks

Currently, GMS carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Retail-Wholesale sector include BMC Stock Holdings, Inc. BMCH, Builders FirstSource, Inc. BLDR and Williams-Sonoma, Inc. WSM. While BMC Stock Holdings sports a Zacks Rank #1 (Strong Buy), Builders FirstSource and Quanta Services carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both BMC Stock Holdings and Builders FirstSource have a three-five year expected earnings growth rate of 5%.

Williams-Sonoma’s current year earnings are expected to grow 4.5%.

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