TopBuild (BLD) to Buy ABS, Expand Presence in East Coast
TopBuild Corp. BLD intends to acquire all assets and businesses of the American Building Systems Group of Companies (“ABS”). The transaction, which is expected to be completed early in second-quarter 2021, will expand its presence in the East Coast.
Following the announcement, shares of the company gained 4.77% during yesterday’s trading session.
Buyout Synergies
ABS’ residential insulation and distribution business has major operations in Georgia, Virginia, the Carolinas, Florida, Massachusetts and New Jersey. It has 34 branches that primarily services the eastern United States. Approximately 94% of ABS’ $144 million annual revenues is generated from the installation of insulation and other building products, with the remaining 6% from distribution.
With this buyout, TopBuild will have a strong customer base, an experienced sales force and 500 highly trained installers to the company’s operations. This will also enhance its presence in many high-growth markets.
Solid Inorganic Moves Bode Well
Acquisitions are an important part of TopBuild’s growth strategy to supplement organic growth, and expand access to additional markets as well as products. During 2020, the company completed three acquisitions — Garland Insulating in October 2020, Hunter Insulation in February 2020 and Cooper Glass Co, LLC in February 2020.
Meanwhile, in January 2021, TopBuild acquired a fireproofing and insulation company, namely LCR Contractors. This acquisition led to the generation of approximately $58 million in annual revenues and helped TopBuild in servicing the Texas markets of Dallas, Austin and Amarillo, along with the Tennessee markets of Knoxville and Nashville.
Since 2016, the company has acquired 15 companies, which — on a combined basis — are contributing almost $650 million to annual revenues. The company remains focused on acquiring installation and distribution companies in core insulation.
Shares of TopBuild have increased 30.3% in the past six months compared with the industry's 20.8% rally. The company has been recording solid earnings and revenue growth over the last few quarters. Adjusted earnings for 2020 of $7.28 per share grew 32.6% year over year. Net sales advanced 3.6% from a year ago to $2.72 billion. Adjusted operating margin expanded 200 basis points (bps) to 13.2%. Adjusted EBITDA margin improved 240 bps to 16.1%. Despite the pandemic-induced challenges, both of its business segments reported revenue growth and solid margin expansion.
Zacks Rank
TopBuild currently carries a Zacks Rank #2 (Buy). The company shares space with Installed Building Products, Inc. IBP, Gibraltar Industries, Inc. ROCK and GCP Applied Technologies Inc. GCP in the same industry, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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