Builders FirstSource ( NYSE: BLDR ) shares are sliding 2.4% in Tuesday premarket trading, erasing some of Monday's gains, after two analysts downgraded the building products firm on the basis of weaker homebuyer demand despite a strong Q2 beat .
RBC Capital Markets analyst Mike Dahl has cut Builders FirstSource ( BLDR ) to Sector Perform from Outperform as housing headwinds intensify and commodity prices further normalize.
Dahl, though, raised his full-year EBITDA estimate to $3.92B from $3.29B in the prior forecast following a robust second quarter. But "volume and price headwinds likely intensify beginning in 4Q and in 1H’23, as BLDR still benefits from a backlog in 3Q before recent declines in builder orders/starts impact," the analyst wrote in a note to clients.
Separately, BTIG downgraded Builders FirstSource ( BLDR ) to Neutral from Buy as slower buyer demand will likely impact housing starts and thus the company's results going forward.
In turn, BTIG lowered its 2023 adjusted EBITDA estimate by 16% to $2.3B, implying a Y/Y slump of 45%, according to a note. The company's Valuation Grade is bullish, but well below that of the sector median.
With single-family starts expected to fall sharply in the second half of 2022, it's important to note that Builders FirstSource ( BLDR ) stock is 90% correlated to trailing single-family starts, suggesting that BLDR will also dip.
"We see limited room for further outperformance (the stock is +47% from recent lows and +8% after 2Q22 results) or multiple expansion until macro headwinds abate and earnings inflect higher," BTIG noted.
On Monday, Builders FoirtSource shares rallied nearly 8% after exceeding Q2 Wall Street consensus and improved 2022 guidance .
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Builders FirstSource stock trims gains after analysts cut on housing headwinds