Builders FirstSource shares rise after Goldman Sachs initiates ‘buy’ coverage on Investing.com

Investing.com — Shares of Builders FirstSource (NYSE: ) rose 1.2% in pre-market trading on Thursday after Goldman Sachs initiated coverage with a “buy” rating and set a 12-month price target of $225.

Goldman Sachs analysts believe Builders FirstSource, a key supplier of building materials and construction services, is poised to benefit from an anticipated rebound in new residential construction.

Analysts report that 82% of the company’s sales are related to new home construction, which makes it particularly sensitive to a recovery in housing activity.

“Taken together, we model consolidated revenues to expand at a 5.3% CAGR between 2024 and 2026,” analysts at Goldman Sachs said.

In addition, the note notes the company’s efforts to diversify its offerings, particularly through higher-margin, value-added services such as off-site grating production and millwork.

These services, together with a focus on improving efficiency and using digital platforms, are expected to support margin expansion and drive future profitability.

Builders FirstSource was also recognized for its robust balance sheet and ability to deploy capital efficiently.

Since 2021, the company has committed more than $3 billion to organic growth and acquisitions, resulting in a 45% reduction in share count.

This capital flexibility, combined with strong cash flow generation, positions the company well for further expansion and shareholder returns.

Goldman Sach’s initiation of coverage comes at a time when broader economic factors, such as a potential cut in interest rates, could further boost housing demand.

As housing affordability improves, particularly for single-family homes, Builders FirstSource will capitalize on this momentum.