NCI Building (NCS) Banks on Strong Bookings, Seasonality

On Jun 11, we issued an updated research report on NCI Building Systems, Inc. NCS. The company is poised to gain from bookings and backlog strength, and encouraging economic indicators. Focus on growth strategy around Insulated Metal Panels (IMP), investments in automation and process innovation, and favorable seasonal factors also bode well.

Let’s illustrate these growth factors in detail.

NCI Building to Grow on Bookings and Backlog Strength

For third-quarter fiscal 2018, NCI Building estimates revenues to be $525-$545 million and adjusted EBITDA of $56-$66 million. Notably, its fiscal 2018 performance will be supported by bookings and backlog strength, as well as encouraging economic indicators.

IMP Well Poised for Growth

NCI Building’s growth strategy around IMP and ability to drive adjacent products across legacy distribution channels is progressing in line with expectations. The company’s IMP product lines are expected to continue growing at a low double-digit rate based on solid underlying demand.

Investments in Automation and Process Innovation

NCI Building is focused on investments in automation and process innovation which will slash operating costs, improve margins, quality and service, and enhance long-term operational flexibility. A key element of this initiative is the execution of an automated frame line for the Buildings business. The frame line is in place and will be fully operational by the end of the fiscal third quarter.

Also, the company will focus on continued improvement in manufacturing, and delivering further cost reductions with the Lean and Six Sigma initiatives across the entire business. This move will reduce excess operational back-office costs and simplify the business.

Seasonality — A Catalyst

NCI Building’s sales in the second half of any fiscal will benefit from seasonality supported by favorable weather conditions for construction.

Share Price Performance

NCI Building has outperformed its industry with respect to price performance over the past year. The stock has gained around 31%, while the industry recorded growth of 20%.

 

Zacks Rank & Other Stocks to Consider

NCI Building carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same sector are Installed Building Products, Inc. IBP, PGT, Inc. PGTI and Patrick Industries, Inc. PATK. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Installed Building Products has a long-term earnings growth rate of 30%. Its shares have rallied 21%, over the past year.

PGT has a long-term earnings growth rate of 19.3%. The company’s shares have appreciated 77% during the same time frame.

Patrick Industries has a long-term earnings growth rate of 12.7%. The stock has gained 27% in a year’s time.

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NCI Building Systems, Inc. (NCS) : Free Stock Analysis Report
 
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