BLDR stock is the IBD Stock Of The Day as the supplier of building products nears an early buy point. Builders earnings boomed triple digits last year in a hot housing market, while lumber prices have shot up again.
On March 1, Builders FirstSource crushed earnings estimates for the fourth quarter of 2021. The Dallas-based company expects a spate of recent acquisitions to fuel sales growth in the coming year. It forecast single family starts will grow in the mid single digits.
"For 2022, we continue to expect strong demand in single-family housing and across our portfolio," CEO Dave Flitman said in the March 1 earnings release.
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Hot Housing Market … But Rates Rising, Lumber Soaring
Home prices have soared because there aren't enough homes to meet high demand. Homes were scarce even before the coronavirus pandemic. After Covid-19 hit, labor shortages and the rise of remote work fueled the market further. People fled cities for suburbs and rural towns to find affordable housing.
For now, the housing market remains resilient in the face of higher mortgage rates.
Dallas-based Builders FirstSource belongs to the IBD 50 list of top growth stocks. It's exposed to lumber price volatility.
"Low prices for wood products over a sustained period can adversely affect our financial condition... as can excessive spikes in prices," Builders' 2020 Annual Report says.
Lumber prices got a boost from a reopening economy as the pandemic wanes. Lumber prices soared again amid Russia's invasion of Ukraine and are back near record highs.
The ongoing, war-fueled bull market in oil and metals adds support to lumber prices, analysts say.
BLDR Stock Technical Analysis
Bear in mind, while the overall market's attempted uptrend remains intact, it has not yet broken from its current status of "market in correction." That means all but the most risk-tolerant investors are best advised to remain in cash and on the sidelines until a follow-through day launches a fresh confirmed uptrend.
Shares of Builders FirstSource dipped 0.4% to 74.43, on the stock market today. BLDR stock eyes an 86.58 traditional buy point in a pattern going back to January.
However, Builders stock is just below an early entry from a downward trendline as well as the March 3 high. That offers an early entry at 78.59 — just above the March 3 high and still close to the 50-day line.
Notably, BLDR stock reclaimed its 50-day/10-week lines this past week, while the major indexes are below virtually every short- and long-term average, struggling amid Russia's Ukraine invasion, inflation and interest rates.
On the weekly chart, the relative strength line for Builders FirstSource is rising and just below all-time highs, according to MarketSmith chart analysis. That strength indicator rallied sharply in the second half of 2021, peaking in December. A rising RS line means that a stock is outperforming the S&P 500.
BLDR stock is trying to eke out a sixth straight weekly gain.
Builders FirstSource earns a superior IBD Composite Rating of 94 out of 99. The Comp Rating combines key fundamental and technical metrics in a single easy-to-use score.
It shows an equally strong Relative Strength Rating of 96 out of a possible 99. That means it has outperformed 96% of all stocks in the past year.
In terms of the Comp Rating, BLDR stock is highest ranked out of 41 stocks in the building-construction products group. It's No. 2 out of 41 in terms of the RS Rating. But Builders' industry group ranks a dull No. 111 out of 197 groups tracked by IBD.
Founded in 1998, Builders makes and supplies lumber, trusses, doors, windows, moldings and other building materials. It has 565 distribution and manufacturing locations across 42 states. Rivals include UFP Industries.
Builders FirstSource: Triple-Digit Earnings, Sales Growth
Builders boasts a perfect 99 EPS Rating, the highest out of 41 stocks in its industry group. It has a superior SMR Rating of A, which, in part, measures sales growth.
For Q4 2021, Builders FirstSource more than doubled earnings per share to $2.78, smashing estimates for $1.87. Sales leapt 85% year over year and also came in ahead of views.
The company has an unblemished track record of earnings beats stretching back to the March 2017 quarter, according to FactSet. It has just a handful of misses on the top line over that period.
In all of 2021, Builders earnings vaulted 243% as sales boomed 131%.
While Builders FirstSource gave a generally upbeat outlook for the coming year, Wall Street expects earnings to decline modestly in both 2022 and 2023. EPS would remain far above the 2020 level. Sales are seen slowing to a 2% gain in 2022 and falling 1% in 2023, but above the 2021 level.
About 40% of Builders' product mix is tied to lumber and lumber goods, exposing it to volatility in commodity prices. Value-added products, such as doors and windows, are driving earnings growth, the company says.
In 2021, its seven acquisitions included National Lumber, a building materials supplier in New England.
Builders FirstSource shows four quarters of rising fund ownership, according to the IBD Stock Checkup tool. As of December 2021, 820 funds owned BLDR stock, up from 631 a year ago.
