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UPDATE: Loop Capital Starts BlueLinx (BXC) at Hold

July 22, 2021 4:24 PM EDT
Get Alerts BXC Hot Sheet
Price: $130.24 +1.52%

Rating Summary:
    6 Buy, 0 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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(Updated - July 22, 2021 4:35 PM EDT)

Loop Capital analyst Jeff Stevenson initiates coverage on BlueLinx (NYSE: BXC) with a Hold rating and a price target of $45.00.

The analyst comments "We are initiating coverage on BXC with a Hold rating as tough comps and cycle concerns, fairly or unfairly, limit near to mid-term catalysts until lumber prices bottom out. BXC has been a primary beneficiary of the sharp increase in residential demand which caused a supply/demand imbalance for materials such as lumber causing prices to spike late last summer. This led to robust sales and gross margin expansion in BXC’s Structural Products business (40% of FY20 sales) since framing lumber represents 65-70% of segment sales. However, lumber prices have fallen ~60% since peaking in May, and while we expect strong 2Q21 earnings as YoY commodity pricing remained high during the quarter, BXC faces significant commodity risk starting in 2H21 even though management proactively ran low inventory levels and used consignment to mitigate risk. The company has also experienced some uncertainty around recent management changes as investors await to hear new CEO Dwight Gibson’s future organic and inorganic growth strategy. Despite these headwinds, long-term investors looking beyond near-term commodity pricing pressures will find a lot to like about the company including its proven track record of organic growth and pricing execution in its higher valued Specialty Products business, heavy residential concentration, improving balance sheet, economies of scale advantage over local and regional competitors and long runway of M&A opportunities in the highly fragmented two-step distribution industry. In addition, the company istrading at the low end of its two-year 6x – 10x valuation
range. While there is no immediate catalyst to move BXC to higher valuation levels in the near-term, long-term focused investors may find value in building a position during this period of depressed valuation levels. Our BXC PT of $45 is based on 7x FY22E EBITDA."

For an analyst ratings summary and ratings history on BlueLinx click here. For more ratings news on BlueLinx click here.

Shares of BlueLinx closed at $42.29 yesterday.


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