In view of the tough housing conditions Zacks senior infrastructure analyst Robert Plaza, CFA has recently issued a Sell recommendation to construction equipment manufacturer and supplier Builders FirstSource, Inc. (BLDR). Here's what his update had to say:
'We maintain our Sell rating on Builders FirstSource and lower our target price from $10 to $7. The company continues to face an uphill battle in an extremely difficult housing industry. Housing activity continues to decline along with lumber prices. These are trends that should persist well into 2008, negatively impacting BLDR s sales and earnings for the next few quarters.
'That said, we think the company is a strong operator that should continue to take market share, but its business model will not be able to overcome the overall weakness in the housing industry. We would avoid the stock until it trades around book value or $7.00. We have continued to take down our EPS estimates for Builders, due to the continued weakness in the housing industry. We are now forecasting earnings of $0.12 per share in 2007 and a loss of $0.29 per share in 2008.
'Housing conditions are so tough that it makes little sense to try to call a bottom in housing related stocks. That said, our new target price is $7.00, or roughly book value of BLDR shares. We view that as a starting point for becoming less negative on the stock.'
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