Friday - Truist Securities has revised its price target for GMS Inc . (NYSE: NYSE:GMS) shares, a leading North American distributor of wallboard and suspended ceilings systems, to $95.00, decreasing from the previous target of $105.00. The firm has also opted to maintain a Hold rating on the stock.
The adjustment follows GMS's recently reported earnings, where EBITDA results did not meet market expectations. The underperformance was attributed primarily to lower steel volume and pricing, which negatively impacted margins. Additionally, the company faced some challenges in the wallboard segment.
Despite these pressures, there was a silver lining as single-family wallboard volume showed positive trends, indicating a favorable direction for this sector. However, the analyst at Truist Securities highlighted the difficulty in forecasting GMS's future revenue, noting potential declines in multifamily sales, which represent 15% of the company's sales, and a slowdown in the non-residential segment, accounting for 55% of sales. Nonetheless, there could be some balancing effect from the residential segment.
The firm's analyst expressed that while deflationary effects are expected to improve the situation, the extent of additional pressure on the company remains uncertain. The analyst stated, "As usual, this will improve as deflation is passed through, but how much more pressure remains is the question."
In light of these factors, Truist Securities anticipates that GMS's near-term results will continue to be volatile. The updated price target reflects these considerations and the current market conditions affecting the company's performance.
In other recent news, GMS Inc. has seen adjustments to its stock price targets by several analyst firms following a miss in its fourth-quarter 2024 financial results. Loop Capital, Baird, and RBC Capital have all reduced their price targets for GMS to $85, $100, and $85 respectively, primarily due to significant gross margin pressures from steel framing price deflation and wallboard margin challenges. These adjustments come as GMS grapples with a longer than usual period to compensate for manufacturer's pricing changes.
Despite these challenges, Baird maintains an outperform rating on GMS, suggesting potential for growth in the long term. However, RBC Capital, while acknowledging GMS's ability to maintain some price resilience, reduced the company's FY'25 EBITDA forecast to $610 million due to anticipated margin pressures and a less favorable outlook for multifamily housing starts.
In addition to these financial adjustments, GMS is set to acquire several Canadian entities, including Yvon Building Supply, Inc., for a potential sum of CAD$196.5 million, pending regulatory approval.
Upon completion, Yvon, which reported net revenues exceeding CAD$190 million in the fiscal year ending February 2024, will retain its brand identity and collaborate with GMS Canada's Watson and Blair brands locally. These are the recent developments for GMS Inc.
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