IBP's Strong Footing In Multi-Family And Commercial Markets, Analyst Sees Future Growth Opportunities

Truist Securities analyst Keith Hughes reiterated a Buy rating on Installed Building Products, Inc. IBP, raising the price target to $170 from $140.

IBP recently reported Q2 results, where earnings beat estimates. 

Price/mix remains positive on the mix with no signs of insulation price deflation in results, the analyst notes

Management noted that mix drove most of the increase in Q2, though pricing contributed somewhat. Hughes adds that faster growth in multi-family and commercial is helping this metric. 

While the single-family demand is bottoming, the analyst fully expects installation in this area to be a growth story in 2024 and sees sequential gains for the remainder of 2023. 

However, the analyst adds that multi-family sales grew 38.3% on a same-branch basis versus the comparable quarter.

Management notes that they expect growth rates in the broader multi-family market to come down but stay positive in the near term. 

Hughes thinks the future of multi-family is hotly debated given falling permit activity and a history of overproduction, particularly given higher interest rates.

For FY23, the analyst raised the EBITDA estimate to $437 million from $422 million. 

For FY24, Hughes increased the EBITDA estimate to $472 million from $451 million. 

The analyst thinks IBP remains one of the few ways to play new construction share gain outside the homebuilders themselves. 

Price Action: IBP shares are trading lower by 2.12% to $148.55 on the last check Thursday.

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