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Coverage Initiation: Beacon Roofing Supply
Value Line has initiated coverage of Beacon Roofing Supply, Inc. (BECN). The company is one of the largest distributors of residential and commercial roofing products. It was first established in 1928 in Charlestown, Massachusetts. Over the next several decades, the company expanded to Worchester, MA and Lewiston, ME. By 1984, Beacon achieved annual revenues of more than $17 million. At this time, Drew Logie joined the company as chief executive officer. He began implementing a number of successful and bold strategies, which would eventually streamline the business. Indeed, in 1997, Beacon had seven branches and generated $72 million in sales.
Mr. Logie remained focused on expanding the company, and in the late 1990s, sought to increase Beacon’s market reach. Over the next few years, Beacon completed a number of sizable acquisitions. The first major purchase was Quality Roofing Supply Company. Soon after, it gained exposure to the Canadian market by acquiring Quebec-based Groupe Bedard. Beacon’s largest purchase came in 2000, when it bought Best Distributing. This transaction increased the company’s annual sales by almost 70%. By 2002, Beacon’s top line surpassed $500 million.
In order to continue its growth strategy, the company needed additional capital. It conducted an initial public offering in September, 2004, and began trading on the NASDAQ Exchange under the ticker BECN. From 2000 to 2010, Beacon completed 10 additional purchases. Today, Beacon is a leading distributor of roofing products, with 185 locations and approximately 2,200 employees. Each location, or local branch, is geared to its specific market, and stocks a wide variety of residential and non-residential roofing products, including shingles, tiles, insulation, fasteners, and vents. The company also provides complimentary building materials such as siding, windows, doors, and specialty lumber products. Beacon’s branch system tends to keep inventory costs down and allows for quick delivery.
Beacon’s operations depend on the health of the residential and non-residential roofing markets. In fiscal 2010 (ended September 30, 2010), 85% of its total sales were derived from these two segments. In the residential space, the bulk of demand comes from re-roofing, rather than new construction. This fact helped Beacon largely avoid the fallout from the U.S. housing market downturn that started in the mid-2000s. Non-residential roofing includes office and commercial undertakings, along with industrial and public works projects. Demand for Beacon’s products tends to surge after natural disasters, like hurricanes and earthquakes. Typically, these events cause substantial roofing damage.
Beacon Roofing Supply’s rise has been quite impressive. It is now one of the largest distributors of roofing and related products in North America. We suggest that interested subscribers await our ongoing Beacon coverage for more information.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.