On Mar 13, 2015, we issued an updated research report on the premium steel & iron company, Gibraltar Industries, Inc. ROCK. Though the company enjoys a leading position in the industry, thanks to its diversified product offering; its trade is currently exposed to several risks.
Bearish Outcomes
Increasing cost of sales remains a major concern for Gibraltar Industries. Benefits of net revenue growth in fourth-quarter 2014 were offset by a 13.1% year-over-year rise in the cost of sales. This, in turn, adversely affected the gross profit margin of the company. If the cost-related issues are not addressed soon, then paybacks from the increasing sales would go in vain.
Despite having decent growth prospects, Gibraltar Industries remains vulnerable to certain issues such as delay in project funding by the government, inflating raw material expenses and reduced marginal cost. These concerns are likely to hurt the company’s top line in the upcoming quarters.
Also, the company faces demand concentration risks as it derives a large portion of its sales from only a handful of customers. Moreover, uncertainties related to international exposure exposes it to severe operational disruptions.
Scopes of Improvement
Strong demand growth in residential market supports the top-line growth of Gibraltar Industries. Revenues in the Residential segment witnessed a year-over-year increase of 23.3% on the back of superior roofing-related and postal storage business. We believe growth in residential product lines would help the company report better results in the upcoming quarters.
Gibraltar Industries is focused on driving profitability through organic growth. The company has lately been undertaking significant restructuring initiatives, which has reduced manufacturing costs and improved efficiency. The company has reorganized and resized its existing businesses in order to suitably meet the new patterns of market demand.
Stocks That Warrant a Look
With a market capitalization of $453.95 million, Gibraltar Industries currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Quanex Building Products Corp. NX, Trex Co. Inc. TREX and Aspen Aerogels, Inc. ASPN. Both Quanex and Trex Co. sport a Zack Rank #1 (Strong Buy), while Aspen Aerogels, Inc. carries a Zacks Rank #2 (Buy).
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