- UBS analyst John Lovallo initiated coverage on several Building Products companies.
- The analyst initiated Masco Corp (NYSE:MAS) with a Buy rating and a price target of $86.
- Despite tough comparisons and inflation, Lovallo expects revenue and operating margins to expand year-over-year in 2022. He also cites the company's diverse portfolio and its leading exposure to lower-ticket repair and remodeling products.
- The analyst initiated Jeld-Wen Holding Inc (NYSE:JELD) with a Buy rating and a price target of $39 as part of a broader research note on the U.S. Building sector.
- Lovallo says consensus forecasts underestimate the company's growth and margin expansion opportunity, adding that Jeld-Wen also offers the best in class 14.3% free cash flow yield.
- The analyst initiated Armstrong World Industries Inc (NYSE:AWI) with a Sell rating and a price target of $103.
- Lovallo says that builder stocks could "spring" this Spring, with average homebuilder P/E multiple already appearing to reflect downward revisions to estimates, rising interest rates, and a potential sharp decline in housing activity.
- The analyst added that he does not expect a material deterioration in volume as pent-up demand is real and continues to be unleashed by COVID impacts.
- The analyst initiated Owens Corning (NYSE:OC) with a Buy rating and a price target of $122.
- Lovallo mentions the company's over $1 billion of free cash flow per year provides significant dry powder for growth investment and return of capital to shareholders.
- Lovallo adds that the average homebuilder P/E multiple already reflects downward revisions to estimates, rising interest rates, and a potential sharp decline in housing activity.
- The analyst initiated Azek Company Inc (NYSE:AZEK) with a Buy rating and a price target of $52.
- The analyst says the company is well-positioned to outperform the industry given its size, innovation, new product offerings, further penetration into the big box retailers, superior recycling capability, a push into adjacent product lines, and significantly increased production capacity.
- The analyst initiated Trex Company Inc (NYSE:TREX) with a Neutral rating and a price target of $111.
- Lovallo says the valuation overhang is the greatest for this stock among the names covered in his report.
- However, given its general composite penetration, Trex is well-positioned to outperform the industry based on its size, innovation, and new product offerings, Lovallo notes.
- Price Action: MAS traded higher by 1.20% at $66.38, JELD up by 5.16% at $25.06, AWI by 1.32% at $107.08, OC up by 3.57% at $94.56, AZEK up by 0.52% at $36.50, and TREX lower by 1.36% at $98.25 on the last check Thursday.
