Installed Building Products: A Stock to Watch

Installed Building Products (NYSE:IBP) has been making waves in the market, and for good reason. The company's impressive EPS growth, strategic acquisitions, and strong capital allocation make it a compelling case for investors. Let's dive into the details and see why ibp is a stock to watch.

EPS Growth: A Standout Performer

Installed Building Products' EPS growth has been nothing short of remarkable. In 2024, the company's EPS increased by 27.44%, from 9.10 to 11.60. This growth is expected to continue, with a forecasted increase of 10.14% to 12.77 in 2025. This trajectory is significantly higher than the average EPS growth forecast for the Consumer Durables industry in the US, which is 5.5% over the next two years.



Strategic Acquisitions: Fueling Growth

One of the key drivers of IBP's success has been its strategic acquisitions. The company has been actively acquiring well-run installers of insulation and complementary building products. In 2024 alone, IBP completed nine acquisitions representing over $100 million in annual revenue. These acquisitions have not only expanded IBP's market reach but also contributed to its record revenue and profitability.

For example, in July 2024, IBP acquired Euroview Enterprises, LLC, Contract Mirror and Supply Co., and clm Solutions, LLC (collectively “Euroview”), an Illinois-based residential and commercial installer of building products in key construction markets in the Midwest, with annual revenue of approximately $20 million. In October 2024, IBP acquired Wholesale Insulation Supply, Inc. doing business as Insulation Supplies, a specialty distributor focused on supplying fiberglass insulation, spray foam insulation, cellulose insulation, and related accessories and machinery to residential and commercial end markets with annual revenue of over $22 million.



Strong Capital Allocation: Returning Value to Shareholders

IBP has also been effective in its capital allocation strategy. The company has utilized its strong cash flow generation and healthy balance sheet to repurchase shares and pay dividends. During the nine-month period ending September 2024, IBP repurchased approximately $66 million of its common stock and paid $75 million in dividends. In the fourth quarter of 2024, IBP repurchased 383 thousand shares of common stock at a total cost of approximately $79 million. IBP's Board of Directors also declared a 6% increase to both the regular quarterly cash dividend and annual variable dividend to $0.37 per share and $1.70 per share, respectively. These actions reflect the Board’s confidence in the company's financial position and ability to support a strategy of returning capital to shareholders.

Diversified Product Portfolio: Mitigating Risks

IBP's diversified product portfolio is another factor contributing to its success. The company offers a wide range of services, including insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, and mirrors. This diversification helps to mitigate risks associated with any single product line and ensures steady revenue streams from various sources.

Favorable Market Conditions: A Positive Outlook

The long-term view on demand for installed building services remains positive, with favorable trends in residential and commercial end markets. Builders are working to meet demand through the increased supply of houses, apartments, and commercial structures, which bodes well for Installed Building Products' future growth prospects.

Conclusion

In conclusion, Installed Building Products' impressive EPS growth, strategic acquisitions, strong capital allocation, diversified product portfolio, and favorable market conditions make it a compelling case for investors. With a "Buy" rating from analysts and an average target price of $226, IBP is a stock to watch in the coming months.