Installed Building (IBP) Buys Royals Commercial For Expansion

In a bid to expand presence in the greater Baltimore and mid-Atlantic markets, Installed Building Products, Inc. (NYSE:IBP) has acquired Royals Commercial Services, Inc. ("Royals Commercial"). Headquartered in Millersville, MD, Royals Commercial serves commercial customers with spray foam insulation and thermal barrier installation services throughout Maryland, Pennsylvania, Virginia, Delaware, as well as New Jersey.

In addition to Royals Commercial, this industry-leading installer of insulation and complementary building products announced that it has acquired a Chicago-based shower, shelving and mirror installer.

Acquisition Strategy to Drive Growth

Since 1999, the company has integrated more than 150 companies through its acquisition strategy. Notably, the buyout strategy has allowed it to diversify product offerings, while expanding into some of the most attractive markets within the United States.

In 2019, net revenues increased 13.1% year over year, primarily driven by increased selling prices, continued recovery in housing markets, strong contributions from acquisitions, and growth across end markets and products. Installed Building Products closed eight acquisitions. Of these, 1st State Insulation, LLC; Expert Insulation, Inc. and Expert Insulation of Brainerd, Inc. (collectively, “Expert Insulation”); as well as Premier Building Supply, LLC were the largest buyouts in 2019. Notably, acquisitions added $64 million to annual revenues during 2019.

The company had completed 10 acquisitions during 2018, excluding several small tuck-in buyouts merged into existing operations.

Commercial End Markets’ Prospects Look Good

Prospects of commercial end markets — which represented approximately 18% of total 2019 revenues — remain strong for 2020, given strong contribution from recent acquisitions, product diversification strategies, favorable pricing trends and stable end-market demand.

The company is well positioned to increase participation in these compelling markets through acquisitions and organic moves. During 2019, net sales grew nearly 25% year over year in the commercial end market.

Particularly in fourth-quarter 2019, its large commercial construction end market registered organic growth of 10.2%. Alpha insulation and waterproofing primarily aided the company to execute its growth strategy.

Shares of this Zacks Rank #2 (Buy) company have gained 38.3% compared with the industry’s 7.4% growth. We believe the above-mentioned strategies and positive housing market fundamentals will help the company to grow further.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Installed Building Products — which shares space with TopBuild (NYSE:BLD) , Arcosa, Inc. (NYSE:ACA) and Armstrong World Industries, Inc. (NYSE:AWI) in the same industry — is also a great pick in terms of growth investment, supported by a Growth Score of A.

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