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Understanding Beacon Roofing Supply’s Risk Factors

Virginia-based Beacon Roofing Supply (BECN) sells roofing materials and complementary building products in North America. It recently divested its solar products business and acquired Crabtree and Midway Sales and Distributing.

Crabtree is a wholesale distributor of residential exterior building materials. Beacon expects that the move to acquire Crabtree will strengthen its position in Tennessee.

Midway Sales, which generates about $130 million in annual sales, operates 10 outlets across Kansas, Missouri, and Nebraska. It distributes building and roofing supplies. Midway’s acquisition is expected to help Beacon bolster its presence in the Midwest.

For the fourth quarter of Fiscal Year 2021, ended September 30, Beacon reported a 6.9% year-over-year rise in revenue to $1.88 billion, in line with the consensus estimate. It posted an EPS of $1.22, up from $0.78 in the same quarter last year. The earnings, however, missed the consensus estimate of $1.54 per share. Beacon is expected to report its upcoming earnings on February 3.

With this in mind, we used TipRanks to take a look at the company’s risk factors.

Risk Factors 

According to the TipRanks Risk Factors tool, Beacon Roofing Supply’s main risk category is Finance and Corporate, which accounts for 47% of the total 19 risks identified for the stock.

Ability to Sell and Macro and Political are the next two major risk categories, which account for 16% each of the total risks identified. The company recently updated its profile with one new risk factor under the Legal and Regulatory risk category. 

The company cautions that the government’s COVID-19 vaccine and testing mandates could increase its costs and disrupt operations. Furthermore, the mandates could reduce the morale of its staff or increase employee turnover, which could have an adverse impact on the business and the company’s financial condition.

Beacon has also updated a previously highlighted Tech and Innovation risk factor. The company observes that a breakdown of its IT systems could cause it to incur unexpected expenses and reduce sales.

Finance and Corporate risk factor’s sector average is at 44%, compared to Beacon’s 47%. Shares of the company have gained about 30% over the past year.

Stock Rating

Recently, RBC Capital analyst Michael Dahl reiterated a Buy rating on the stock with a price target of $65, which suggests 17.31% upside potential.

Consensus among analysts is a Hold based on 2 Buys, 3 Holds, and 1 Sell. The average Beacon Roofing Supply price target of $61.25 implies 10.54% upside potential to current levels.

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