Beacon Roofing Supply (BECN) To Benefit From Consolidation

Morgan Keegan analysts Brent D. Rakers and Anjali R. Voria reiterated their Outperform rating for shares of Beacon Roofing Supply, Inc. BECN. Morgan Keegan does not provide price targets for the companies that it follows. Rakers and Voria noted that ABC Supply, the biggest roofing distributor in North America, announced that it had reached an acquisition agreement with Bradco Supply, the third biggest player in the North American market. The analysts said that they believe the acquisition is good news for the industry as a whole and for Beacon Roofing Supply, Inc., which is the second biggest company in the field, in particular. They said that the deal could spur further acquisitions and that industry consolidation should aid pricing disciplines. The Morgan Keegan analysts wrote, "importantly for Beacon, there is substantial market overlap involved with yesterday’s announced deal. In markets such as Florida (that remains a focus state for Beacon), ABC had 18 locations with Bradco having 25-30, while in New York, the two players had 9 and 10 locations, respectively (Beacon has only one New York branch). We believe it is likely that talented sales/branch management personnel will become available in the marketplace, and that real estate might come onto the market. As the industry’s sole publicly owned company with a strong core national and regional management team, we feel the company represents an attractive option if former ABC-Bradco employees become displaced."