GMS' Wallboard Price Trends Surpass Expectations, Analyst Discusses Potential Limitations

Truist Securities analyst Keith Hughes reiterated a Hold rating on the shares of GMS Inc. GMS, raising the price target to $72 from $60.

The company reported Q4 FY23 sales growth of 1.2% Y/Y (+0.7% Y/Y organically) to $1.304 billion, beating the consensus of $1.27 billion.

The analyst thinks the results were better than expected as wallboard and ceilings' pricing showed gains, partly offset by declining steel prices and weaker volumes.

Management looks for continued wallboard pricing up year-over-year next quarter and growth in ceiling pricing, notes the analyst. 

Following the results, the analyst increased FY 2024 EBITDA estimate to $596 million from $507 million. 

The first quarter of FY24 is expected to see mid- to high-single-digit volume gains in commercial wallboard and high teen gains in the multifamily business. 

However, volume in single-family is expected to fall 10%-15% in the first quarter of FY24 versus the prior year. 

Also Read: GMS Acquires EMJ In Chicago & Blair In Ontario For Undisclosed Financial Terms

Pricing in the wallboard is expected to still be up high-single-digits, notes the analyst. 

Hughes also introduced an FY 2025 EBITDA estimate of $614 million.

The analyst thinks GMS has mixed exposure across end markets, but the housing outlook and the related potential pressure on wallboard pricing will limit multiple expansions. 

Pricing is also expected to remain under pressure, given the decline in steel inputs. 

Hughes believes the stock is held back by its non-residential exposure but notes the wallboard price trends are much better than expected.

Price Action: GMS shares are trading higher by 5.9% to $71.77 on the last check Tuesday.