- William Blair analyst Ryan Merkel on Tuesday has downgraded Beacon Roofing Supply ( NASDAQ: BECN ) to Market Perform from Outperform due to prospects for decreasing gross margins in 2023 and a broad slowdown in the housing market.
- While gross margin has gained 2.3% since 2019 fueled by shingle price inflation and commercial roofing shortages, Merkel is expecting at least 100 basis points of downside over the next 12 to 18 months as prices and costs normalize, he wrote in a note to clients.
- "We believe multiple expansion could be difficult with gross margins peaking and a slowing housing market," Merkel emphasized.
- As a result, Merkel has reduced his 2023 adjusted EBITDA estimate in Beacon Roofing Supply ( BECN ) by 20% to $704M vs. the Wall Street consensus of $790M, according to the note.
- Towards the end of June, RBC Capital Markets cut Beacon Roofing Supply to Sector Perform .
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Beacon Roofing Supply cut at William Blair on peak margins, slowing housing market