TopBuild: Zacks’ Bull of the Day Play

TopBuild Corporation (BLDSnapshot Report) is cashing in on the hot housing market. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by the double digits both this year and next.

TopBuild is the largest purchaser, installer and distributor of insulation in the United States. It distributes through TruTeam which has 175 branches in 40 states.

It also distributes insulation through Service Partners from 70 branches in 33 states.

The company is a small cap, with a market cap of $1.3 billion.

3 Earnings Beats in a Row

On May 11, TopBuild reported first quarter results and beat the Zacks Consensus for the third straight quarter. Earnings were $0.31 compared to the Zacks Consensus of just $0.15 for a massive 106% beat.

A mild winter, which boosted the housing construction market, aided sales in the quarter.

Net sales rose 15.5% to $414 million year over year.

Historically, the first quarter is the slowest of the year and even though it was a hot quarter, the company still expects it to remain that way this year. But given how hot it was, the swing in seasonality might not be as strong in future quarters.

However, it still expects business in the remainder of the year to remain strong.

“From a macro perspective, we believe the U.S. housing recovery will continue for the next several years,” said Jerry Volas, CEO.

“Although we expect that TopBuild will certainly be advantaged by that, we intend to outperform that recovery with organic growth and strategically selective acquisitions in both the residential and commercial space. Additionally, we believe that continued improvements in operating efficiency will optimize the impact of this expected growth on operating margins,” he added.

Earnings Estimates Rise

Given the positive sentiment from TopBuild, it’s not surprising that the analysts are bullish as well.

2 estimates were raised for 2016 in the last 60 days which pushed the Zacks Consensus up to $2.02 from $1.80.

That is earnings growth of 51.8% over 2015 which saw earnings of only $1.33.

The growth is expected to continue into 2017. Analysts see further earnings growth of 17.3%.

Shares Rebound Off Winter Lows

Shares have soared off the winter lows but they’re still trading at attractive valuations.

TopBuild has a forward P/E of 16.9. The average P/E of the S&P 500 is 17.5.

For those looking for a way to play the hot housing market without buying the homebuilders, TopBuild is one to keep on your short list.

Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, they should be removed immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See all Zacks Strong Sells and Strong Buys absolutely free >>.

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.

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