The home improvement market is experiencing growth, fueled by rising disposable incomes, high home interest rates and the desire to improve living spaces. Given this backdrop, fundamentally strong home improvement stocks Builders FirstSource ( BLDR ), JELD-WEN Holding ( JELD ), and Snap-on ( SNA ) could be solid buys for this month and beyond. Read on….
Due to evolving consumer preferences and increasing consumer demand for renovated homes, the home improvement industry is well positioned to stay alive. Therefore, shares of quality home improvement Builders FirstSource, Inc.BLDR), JELD-WEN Holding, Inc.YELLOW), and Snap-on Incorporated (ISA) they can be smart portfolio additions for February and beyond.
The home remodeling market is growing, driven by shifting consumer preferences and rising disposable incomes. Personal disposable income increased with $51.80 billion (0.3%) in December 2023.
The rapid change in consumer demographics, especially due to the millennial and The population of General Zhas significantly boosted demand for home renovations and improvements.
For more, rising interest rates at home has encouraged homeowners to upgrade and renovate their current homes to meet their long-term needs, boosting sales of the home improvement market.
In addition, the incorporation of AI in the industry has improved the customer experience and improved business operations by reducing friction, eliminating paperwork and increasing response rates.
According to Statista, home improvement sales in the US are expected to exceed $600 billion by 2027.
With these favorable trends in mind, let's take a look at the three B-rated basics Home Improvement and Merchandise shares, starting with the number 3.
Stock #3: Builders FirstSource, Inc. (BLDR)
BLDR manufactures and supplies building materials, manufactured components and construction services to professional home builders, subcontractors, remodelers and consumers in the US
On February 21, BLDR's Board of Directors authorized the repurchase of up to $1 billion of the company's common stock, including approximately $200 million remaining in the preliminary share repurchase plan authorized in April 2023.
The company repurchased 1.60 million shares of its common stock in the fourth quarter ended December 31, 2023, at an average price of $131.74 per share for $208.90 million, including fees and taxes.
In 2023, the company repurchased 17.80 million shares of its common stock at an average price of $100.49 per share for $1.80 billion, including fees and taxes. The company reduced its total shares outstanding by 12.2% in 2023. As of December 31, 2023, the shares outstanding were 121.90 million.
After the 12-month BLDR cash from operations of $2.67 billion is 789.7% higher than the industry average of $299.70 million. Its trailing 12-month net income and leveraged FCF margins of 9.10% and 11.22% are 55.3% and 69.6% higher than the industry average of 5.86% and 6.61%, respectively.
For the fiscal fourth quarter ended December 31, 2023, BLDR's net sales and gross margin stood at $4.15 billion and $1.46 billion, respectively. Additionally, its adjusted EBITDA was $685.50 million.
For the same quarter, adjusted net income stood at $439.30 million, while adjusted net income per share increased 10.6% from the year-ago quarter to $3.55.
The Street expects BLDR's revenue for the fiscal first quarter ending March 2024 to rise 1.4% year over year to $3.94 billion. Its EPS is expected to be $2.45 for the same quarter. The company beat EPS consensus estimates in each of the trailing four quarters and revenue consensus estimates in three of the trailing four quarters, which is impressive.
The stock has gained 139.8% over the past year to close the last trading session at $188.37. Over the past nine months, it has gained 56.8%.
BLDR's strong perspectives are reflected in it POWR Ratings. The stock has an overall rating of B, equal to Buy in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted on an optimal scale.
The stock has a grade of B for timing and quality. It is ranked 22nd among 56 B-rated stocks Home Improvement and Merchandise industry.
Click here for additional POWR ratings for BLDR (Growth, Value, Stability and Sentiment).
Stock #2: JELD-WEN Holding, Inc. (YELLOW)
JELD designs, manufactures and sells wood, metal and composite doors, windows and related building products in North America and Europe.
JELD's trailing 12-month asset turnover ratio of 1.33x is 65.7% higher than the industry average of 0.80x, while its trailing 12-month earnings per share of $3.38 is 45.8% higher than the industry average. of $2.32.
For the fiscal fourth quarter ended December 31, 2023, JELD's net income and gross margin stood at $1.02 billion and $191.70 million, respectively. Additionally, its adjusted EBITDA from continuing operations increased 10.9% year-over-year to $86.50 million.
For the same quarter, adjusted net income from continuing operations and adjusted net income per share from continuing operations stood at $31.70 million and $0.37, up 9.7% and 8.8%, respectively, from the year-ago quarter .
The Street expects JELD's EPS for the fiscal year ending December 2024 to rise 8.5% year over year to $1.73. Its revenue is expected to be $4.16 billion for the same year. The company beat EPS consensus estimates in each of the trailing four quarters and revenue consensus estimates in three of the trailing four quarters.
The stock has gained 40.4% over the past year to close the last trading session at $18.11. Over the past nine months, it has gained 23.3%.
JELD's solid fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
JELD currently has an A grade and a B for value. Within the same industry, it ranks #14.
Beyond what we've said above, we've also rated the stock for Growth, Stability, Sentiment and Quality. Get all JELD assessments here.
Stock #1: Incorporated snap-on (ISA)
SNA manufactures and markets tools, equipment, diagnostic and repair information and systems solutions for professional users worldwide. It operates through the Trade & Industrial Group; Snap-on Tools Group; Repair Systems and Information Group; and Financial Services segments.
On February 15, SNA's board of directors declared a quarterly common stock dividend of $1.86 per share, payable to shareholders on March 11. SNA has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939.
It pays an annual dividend of $7.44 per share, which translates to a dividend yield of 2.76% over the current share price. Its four-year average yield is 2.52%. SNA's dividend payouts have grown at CAGRs of 14.6% and 14.5% over the past three and five years, respectively.
On November 1, 2023, SNA acquired Mountz, Inc., a leading developer, manufacturer and marketer of high-precision torque tools, including measurement, calibration and documentation products, for approximately $40 million in cash.
The acquisition of Mountz complements and expands SNA's torque offerings to customers in a variety of industries, including aerospace, transportation and advanced manufacturing.
SNA's trailing 12-month earnings per share of $19 is 719.6% higher than the industry average of $2.32. Its trailing 12-month net income and FCF margins of 19.79% and 15.45% are 237.8% and 133.5% higher than the industry average of 5.86% and 6.61%, respectively.
For the fiscal fourth quarter ended December 30, 2023, SNA's net sales and gross profit stood at $1.20 billion and $577.60 million, up 3.5% and 3%, respectively, from the year-ago quarter. Additionally, year-end cash and cash equivalents increased 32.3% year-over-year to $1 billion.
For the same quarter, its net income attributable to SNA and net earnings per share attributable to SNA stood at $255.30 million and $4.75, up 6.9% and 7.5%, respectively, from the year-ago quarter.
The Street expects SNA's revenue for the fiscal first quarter ending March 2024 to rise 1.2% year-over-year to $1.20 billion, and its EPS is expected to rise slightly year-over-year to $4.64. The company beat EPS consensus estimates in each of the trailing four quarters and revenue consensus estimates in three of the trailing four quarters.
The stock has gained 11.1% over the past year to close the last trading session at $271.23. Over the past nine months, it has gained 3.8%.
SNA's POWR ratings reflect its positive outlook. The stock has an overall rating of B, equal to Buy in our proprietary rating system.
SNA has an A for Quality and a B for Stability. Within the same industry, it ranks #10.
To view additional POWR Ratings for Growth, Value, Momentum and Sentiment for SNA, Click here.
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Shares of BLDR were flat in premarket trading on Friday. Year-to-date, BLDR has gained 12.84%, versus a 6.77% gain in the benchmark S&P 500 over the same period.
About the Author: Neha Panjwani
From her school days, Neha nurtured a deep fascination for finance, a passion that led her to a career as an investment analyst after completing her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her knowledge of investment fundamentals. Neha's primary objective is to assist retail investors in discerning optimal investment opportunities by diligently evaluating the core aspects of financial instruments, with a primary focus on stocks and ETFs. Its commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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