NCI Building (NCS) To Grow On Investments, Costs A Concern

By Zacks Investment ResearchStock MarketsDec 19, 2017 08:37PM ET

www.investing.com/analysis/nci-building-ncs-to-grow-on-investments-costs-a-concern-200274756

NCI Building (NCS) To Grow On Investments, Costs A Concern

By Zacks Investment Research | Dec 19, 2017 08:37PM ET

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PATK

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On Dec 19, we issued an updated research report on NCI Building Systems, Inc. (NYSE:NCS) . The company is poised to gain from its encouraging outlook, focus on growth strategy around insulated metal panels (IMP), and investments in automation and process innovation. However, additional charges related to restructuring and volatile steel prices are expected to thwart results.

Upbeat View

For first-quarter fiscal 2018, NCI Building estimates revenues to be in the range of $390-$410 million, reflecting 2% year-over-year growth at the mid-point. The company projects its adjusted EBITDA to be in the $24-$34 million range in the first-quarter fiscal 2018. It anticipates gross margins to improve in fiscal 2018 driven by a solid cost structure. The company expects to see a strong fiscal 2018 as compared to fiscal 2017.

IMP Sales to Drive Growth

NCI Building’s focus on growth strategy around IMP and its ability to drive adjacent products across the engines of legacy distribution channels will support the company’s performance. It expects the IMP product lines to improve at a low double-digit rate in fiscal 2018 based on solid underlying demand. Further, NCI Building anticipates low-rise non-residential construction starts in the fiscal year to grow in mid-single digits, with the adjustable markets for legacy businesses projected to be up in the range of 2-4%.

Investments to Boost Results

Notably, NCI Building is well positioned for long-term growth on the back of rising demand for key products and strategic actions. The company is focused on investments in automation and process innovation which will slash operating costs, improve margins, quality and service, and enhance operational flexibility. It will also focus on continued improvement in manufacturing, and delivering further cost reductions with the Lean and Six Sigma initiatives across the entire business. The step will reduce excess operational back-office costs and simplify the business.

Additional Charges to Mar Profit

Over the last several years, NCI Building has incurred various charges related to cost restructuring and disposal of idle or non-core assets. The company expects to record continued activity in these areas and incur additional charges during fiscal 2018. It will continue to recognize these items separately in the reporting of operating results each quarter, which will impact margins and profitability.

Steel Prices Remain a Concern

NCI Building’s volumes were adversely affected by a rapid escalation in steel prices over the last two years. Even though the company has successfully passed through higher steel-input costs in fiscal 2017, volatile steel prices might impede its performance in fiscal 2018.

Share Price Performance

NCI Building has underperformed its industry with respect to price performance in a year’s time. The stock has gained around 19.7%, while the industry has recorded growth of 20.4% during the same time frame.

Zacks Rank & Stocks to Consider

NCI Building currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry are Patrick Industries, Inc. (NASDAQ:PATK) , United Rentals, Inc. (NYSE:URI) and Armstrong World Industries Inc. (NYSE:AWI) .

Patrick Industries has a long-term expected earnings growth rate of 11.5%. Its shares have gained 29.8% year to date. The company flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Rentals carries a Zacks Rank #2 (Buy). It has a long-term expected earnings growth rate of 18.5%. Its shares have rallied 57.5%, in the year so far.

Armstrong World Industries, another Zacks Rank #2 stock, has a long-term expected earnings growth rate of 11.7%. The stock has appreciated 42.3% during the same time frame.

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NCI Building Systems, Inc. (NCS): Free Stock Analysis Report

United Rentals, Inc. (URI): Free Stock Analysis Report

Armstrong World Industries Inc (AWI): Free Stock Analysis Report

Patrick Industries, Inc. (PATK): Free Stock Analysis Report

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NCI Building (NCS) To Grow On Investments, Costs A Concern

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