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Builders FirstSource Pulls 2020 View on Coronavirus Mayhem

Zacks Equity Research

In the wake of current macro-economic conditions owing to uncertainties surrounding the impact of coronavirus, many companies have come out with store closure and guidance updates. Builders FirstSource, Inc. BLDR recently announced updates on business operations and the suspension of its 2020 guidance.

Nonetheless, the largest supplier of building products, prefabricated components, and value-added services in the United States stated that it is still open and operational in certain locations, where construction activities have not been prohibited.

First-Quarter 2020 Guidance Affirmed

Although Builders FirstSource has withdrawn 2020 view, the company has reaffirmed its guidance for the first quarter, which is scheduled to release on May 1, after market close. It expects to generate net sales growth within 6-10% year over year, on a sales per day basis. Adjusted EBITDA is projected between $90 million and $100 million. The company also noted that the business experienced strong activity levels for the majority of the quarter.

Moreover, Builders FirstSource believes that it is well positioned to manage the rapidly evolving homebuilding environment, going forward.

Operational Updates

The company entered the pandemic situation with approximately $150 million of cash on hand and no debt maturities until 2024. It is delaying capital expenditures that have the least impact on operations, deferring or limiting non-essential operating expenses, and optimizing all areas of working capital.

In addition to these steps, it is freezing hiring, deferring corporate wage increases and undertaking other actions to protect the existing jobs. Also, it is reducing executive and senior management cash compensation, and replacing board compensation with the company stock.

Our Take

Corornavirus-induced shutdowns will negatively impact the economy as a whole. However, being essential suppliers of diversified products and services to builders and contractors, the Zacks Building Products - Retail industry players like BMC Stock Holdings, Inc. BMCH, Lowe's Companies, Inc. LOW and Beacon Roofing Supply, Inc. BECN did not implement complete closure of facilities. Moreover, these companies do not expect any material impact on near-term results.

Shares of this Zacks Rank #3 (Hold) company have declined 46.5% compared with the industry’s 16.8% fall so far this year. The downside is reflective of the rapidly evolving market conditions due to the pandemic. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

That said, long-term housing prospects remain strong. Also, market pundits expect improvement in the second half of the year. Strong balance sheet and operational agility will help Builders FirstSource address the rapidly changing market conditions.

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