Beacon Roofing Supply Downgraded to Sector Perform, Shares Down 4%

Beacon Roofing Supply, Inc. (NASDAQ:BECN) was downgraded to sector perform from outperform by RBC Capital analysts. Also, the price target was lowered to $58 from $70. Shares were trading around 4% lower Wednesday afternoon.

The analysts keep their 2022 EBITDA estimate largely unchanged at $829 million (previously $832 million) while lowering their 2023 EBITDA estimate more meaningfully to $664 million from $775 million, as they model a decline in volumes, price give-back amid likely increased competition and further gross margin normalization.

The analysts reduced their 2023 revenue estimate to $7.46 billion (down 8.5% year-over-year) from $7.88 billion (down 4% year-over-year). Despite noting that they continue to like the company’s self-help initiatives, improved balance sheet, and relatively more defensive product portfolio, the analysts downgrade the company to sector perform following the stock’s year-to-date relative outperformance given their expectation for deteriorating macro housing conditions to weigh on 2023 earnings.