The home improvement market is experiencing a surge, driven by increasing disposable income, high home interest rates, and a desire to enhance 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….
Owing to evolving consumer preferences and rising consumer demand for refurbished homes, the home improvement industry is well-placed to remain buoyed. Therefore, quality home improvement stocks Builders FirstSource, Inc. (BLDR), JELD-WEN Holding, Inc. (JELD), and Snap-on Incorporated (SNA) could be wise portfolio additions for February and beyond.
The residential remodeling market is growing, driven by shifting consumer preferences and rising disposable income. Disposable personal income rose by $51.80 billion (0.3%) in December 2023.
The rapid change in consumer demographics, particularly due to the millennial and Gen Z population, has significantly driven the demand for home renovations and upgrades.
Additionally, the rise in home interest rates has encouraged homeowners to upgrade and revamp their current homes to meet their long-term requirements, bolstering the home improvement market sales.
Furthermore, the incorporation of AI in the industry has enhanced the customer experience and streamlined business operations by reducing friction, eliminating paperwork, and increasing response rates.
As per Statista, home improvement sales in the U.S. are expected to surpass $600 billion by 2027.
Considering these conducive trends, let’s take a look at the fundamentals of the three B-rated Home Improvement & Goods stocks, starting with number 3.
Stock #3: Builders FirstSource, Inc. (BLDR)
BLDR manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the U.S.
On February 21, BLDR’s Board of Directors authorized the repurchase of up to $1 billion of the company’s outstanding shares of common stock, inclusive of the approximately $200 million remaining outstanding in the prior share repurchase plan authorized in April 2023.
The company repurchased 1.60 million shares of its common stock in the fourth quarter that ended December 31, 2023, at an average price of $131.74 per share for $208.90 million, inclusive of 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, inclusive of fees and taxes. The company reduced its total shares outstanding by 12.2% in 2023. As of December 31, 2023, shares outstanding were 121.90 million.
BLDR’s trailing-12-month 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 levered FCF margins of 9.10% and 11.22% are 55.3% and 69.6% higher than the industry averages of 5.86% and 6.61%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, BLDR’s net sales and gross margin stood at $4.15 billion and $1.46 billion, respectively. Moreover, its adjusted EBITDA stood at $685.50 million.
For the same quarter, its 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.
Street expects BLDR’s revenue for the fiscal first quarter ending March 2024 to increase 1.4% year-over-year to $3.94 billion. Its EPS is expected to be $2.45 for the same quarter. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue 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 robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum and Quality. It is ranked #22 within the B-rated 56-stock Home Improvement & Goods industry.
Click here for the additional POWR Ratings for BLDR (Growth, Value, Stability, and Sentiment).
Stock #2: JELD-WEN Holding, Inc. (JELD)
JELD designs, manufactures, and sells wood, metal, and composite materials 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 cash per share of $3.38 is 45.8% higher than the industry average of $2.32.
For the fiscal fourth quarter that ended December 31, 2023, JELD’s net revenues and gross margin stood at $1.02 billion and $191.70 million, respectively. Moreover, its adjusted EBITDA from continuing operations increased 10.9% year-over-year to $86.50 million.
For the same quarter, its 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% from the year-ago quarter, respectively.
Street expects JELD’s EPS for the fiscal year ending December 2024 to increase 8.5% year-over-year to $1.73. Its revenue is expected to be $4.16 billion for the same year. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue 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, translating to Buy in our proprietary rating system.
JELD has an A grade for Momentum and a B for Value. Within the same industry, it is ranked #14.
Beyond what we’ve stated above, we have also rated the stock for Growth, Stability, Sentiment, and Quality. Get all ratings of JELD here.
Stock #1: Snap-on Incorporated (SNA)
SNA manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group; Snap-on Tools Group; Repair Systems & 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% on the current share price. Its four-year average yield is 2.52%. SNA’s dividend payments 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 cash per share of $19 is 719.6% higher than the industry average of $2.32. Its trailing-12-month net income and levered FCF margins of 19.79% and 15.45% are 237.8% and 133.5% higher than the industry averages of 5.86% and 6.61%, respectively.
For the fiscal fourth quarter that 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% from the prior year quarter, respectively. Moreover, its cash and cash equivalents at end of year increased 32.3% year-over-year to $1 billion.
For the same quarter, its net earnings 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% from the year-ago quarter, respectively.
Street expects SNA’s revenue for the fiscal first quarter ending March 2024 to increase 1.2% year-over-year to $1.20 billion, and its EPS is expected to increase marginally year-over-year to $4.64. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue 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 prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
SNA has an A grade for Quality and a B for Stability. Within the same industry, it is ranked #10.
To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for SNA, click here.
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BLDR shares were unchanged in premarket trading Friday. Year-to-date, BLDR has gained 12.84%, versus a 6.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals.
Neha’s primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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