On Wednesday, Loop Capital adjusted its stock price target for Builders FirstSource (NYSE:BLDR), a company involved in the supply of building materials, to $195 from the previous $215. The firm sustained its Buy rating on the stock.
The revision reflects a more conservative revenue outlook for the fiscal year 2024, citing near-term challenges and a slight dip in demand for single-family homes. Loop Capital's second-quarter forecast for the company is now below the consensus, factoring in additional weather-related difficulties and a significant year-over-year drop in multi-family sales.
Builders FirstSource's financial performance in the second quarter has been impacted by weather disruptions and a decline in multi-family housing sales. The firm anticipates that while Builders FirstSource's full-year guidance for 2024 may not see substantial changes, there is a possibility that the company might reduce the upper end of its guidance range. This caution is due to the expected heavier reliance on the latter half of the year and the slowdown in single-family housing starts.
Despite the lowered expectations, the stock has experienced a recovery following last week's Consumer Price Index (CPI) report, which spurred optimism about potential interest rate cuts before year's end. Builders FirstSource, with approximately 70% of its sales stemming from single-family residential construction and two-thirds of its product categories tied to housing starts, stands to gain significantly from such monetary policy adjustments.
Loop Capital underlines that if the Federal Reserve does implement rate cuts in the current year, Builders FirstSource could see additional benefits. The firm believes that these potential policy changes could provide further upside to their forecasts for the fiscal year 2025, given the company's strong link to the single-family residential construction market.
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