Key Takeaways Builders FirstSource's Q3 EPS estimate slipped to $1.69, signaling a 45% yearly decline.Net sales are projected at $3.80B, down 10.3% amid a weak housing and affordability backdrop.Market headwinds may weigh on value-added products, though acquisitions and digital efforts offer support.Builders FirstSource, Inc. (BLDR) is slated to report third-quarter 2025 results on Oct. 30, before market open.In the last reported quarter, the company’s adjusted earnings per share (EPS) surpassed the Zacks C ...

Subscribers to Chart of the Week received this commentary on Sunday, October 26.The year seems to be flying by, with the last week of October rapidly approaching. October has been a month filled with enough volatility to give any investor whiplash, though all three major indexes look positioned to eke out healthy monthly wins. There are several names worth keeping close to the belt going into November, as fall continues and 2025 wraps up.One of our favorite monthly routines is getting a fresh batch of data ...

Core Insights - Builders FirstSource, Inc. (BLDR) is the largest U.S. supplier of building materials with a market cap of $13.5 billion, providing an integrated home-building solution through a nationwide network of facilities [1] Financial Performance - The company is expected to release its fiscal Q3 2025 results on October 30, with analysts projecting an adjusted EPS of $1.69, a nearly 45% decrease from $3.07 in the same quarter last year [2] - For fiscal 2025, adjusted EPS is forecasted to be $6.72, down 41.9% from $11.56 in fiscal 2024, but projected to rise 6.6% year-over-year to $7.16 in fiscal 2026 [3] Stock Performance - BLDR stock has declined 34.4% over the past 52 weeks, underperforming the S&P 500 Index's 14.8% return and the Industrial Select Sector SPDR Fund's nearly 11% gain during the same period [4] - Despite weaker-than-expected Q2 2025 revenue of $4.23 billion, shares recovered slightly due to an adjusted EPS of $2.38 beating analyst expectations, indicating strong cost control and operational efficiency [5] Analyst Ratings - Analysts maintain a cautiously optimistic view on BLDR stock, with a consensus "Moderate Buy" rating; among 21 analysts, 10 suggest a "Strong Buy," one a "Moderate Buy," eight a "Hold," and two a "Strong Sell" [6] - The average analyst price target for Builders FirstSource is $142.40, suggesting a potential upside of 17.4% from current levels [6]

Core Viewpoint - Builders FirstSource, Inc. is highlighted as a key player in the housing market, with potential for growth if housing conditions improve, particularly if mortgage rates decline [1][2]. Company Overview - Builders FirstSource, Inc. manufactures and distributes building materials, prefabricated components, and construction services for both residential and commercial builders [2]. - The company also offers design software, professional installation, and custom millwork, positioning itself as a major consolidator in a previously fragmented industry [2]. Market Performance - The stock has been a strong long-term performer but peaked early last year and has since declined due to a weak housing market influenced by high interest rates [2]. - Unlike other market stocks, Builders FirstSource did not see significant recovery in April, and following the earnings report on May 1st, the stock further declined as management lowered their full-year forecast [2].

Market Trends - The market experienced a shift with technology and AI stocks pulling back while broader economy companies gained [1] - The S&P 500 lost as much as 1.5% but closed down only 0.2%, while the Dow Jones Industrial Average finished up 0.4% after a nearly 1% jump [3] - The Nasdaq Composite closed down 0.8% after falling as much as 2.1% during the session [3] Federal Reserve Commentary - Federal Reserve Chair Jerome Powell's comments suggested the central bank might halt the reduction of its bond holdings, which could positively impact mortgage rates and the housing market [4] Company Performance - Strong earnings from major banks, particularly Wells Fargo, were noted, indicating potential strength in the financial sector [5] - Builders FirstSource saw a significant increase, suggesting a possible improvement in the housing market [5] - Retail home improvement companies like Home Depot and Lowe's also experienced gains [5] Economic Outlook - The current market is perceived as having become too heated, with a desire for a return to a more stable economic environment [6] - There is hope for a more conciliatory approach from the U.S. government towards China to stabilize market conditions [6]

Group 1 - Black Bear Value Fund reported a return of -7.1% in September, -1.0% in the quarter, and -12.7% year-to-date, contrasting with the S&P 500's returns of +3.6% in September, +8.1% in the quarter, and +14.8% year-to-date [1] - Builders FirstSource, Inc. (NYSE:BLDR) experienced a one-month return of -11.61% and a 52-week loss of 32.44%, with a market capitalization of $14.32 billion as of October 8, 2025 [2] - The investment letter highlighted a structural shortage of housing in the USA, with higher mortgage rates limiting existing home supply as homeowners remain locked into low-rate mortgages [3] Group 2 - Builders FirstSource, Inc. (NYSE:BLDR) saw a 5% decrease in second-quarter sales, totaling $4.2 billion, while the number of hedge funds holding the stock increased from 58 to 74 [4] - Despite the potential of Builders FirstSource, certain AI stocks are considered to offer greater upside potential and less downside risk [4]

Core Insights - The Black Bear Value Fund has underperformed compared to broader indices, returning -12.7% year-to-date against the S&P 500's +14.8% [11] - The fund's strategy focuses on long-term investments in underappreciated businesses, particularly in sectors currently facing challenges but with potential for recovery [4][28] Performance Overview - The Black Bear Value Fund returned -7.1% in September, -1.0% for the quarter, and -12.7% year-to-date [11] - In contrast, the S&P 500 returned +3.6% in September, +8.1% for the quarter, and +14.8% year-to-date [11] Investment Strategy - The fund emphasizes a private investing mindset, looking beyond short-term market noise to identify long-term value [4] - The portfolio is heavily weighted in sectors like homebuilding, chemical production, and metallurgical coal, which are currently underperforming but have long-term growth potential [4][28] Key Holdings Builders FirstSource (BLDR) - BLDR is experiencing a structural housing shortage in the USA, with management reducing their 2025 cash flow outlook from $800 million-$1.2 billion to $800 million-$1 billion [6][8] - The company has shifted focus to value-added products, which now account for over 40% of revenue, and has been actively buying back stock [7][9] Flagstar Financial (FLG) - FLG has undergone a significant turnaround, raising over $1 billion in capital and stabilizing its balance sheet [12][13] - The bank is trading at approximately 65% of a conservatively marked balance sheet, with potential for a 50-150% increase in value over the next 1-3 years [15] Lanxess (LXS.DE) - LXS has shifted its focus from cyclical, capital-intensive businesses to more stable, lower-capital businesses, increasing its US sales from 15% to nearly 30% [17] - The company is expected to generate €200-250 million in free cash flow in a normalized environment, with a potential cash inflow of €500 million from a joint venture [19][20] Tidewater (TDW) - TDW operates one of the largest fleets of offshore support vessels, with a strong long-term outlook despite near-term uncertainties [21] - The company is currently generating over $300 million in free cash flow, with expectations to increase this to $500 million-$1 billion in a normalized environment [23] Warrior Met Coal (HCC) - HCC is investing heavily in the Blue Creek mine, which is expected to significantly boost free cash flow once the investment period concludes [24][25] - The company anticipates generating $200 million-$850 million in annual free cash flow post-investment, translating to a 6-25% unlevered annual free cash flow yield [26][27]

Core Insights - Builders FirstSource held its 2025 charity event on September 24-25, raising approximately $1.6 million for Blood Cancer United [1] - This event marks the 19th year of partnership between Builders FirstSource and Blood Cancer United, contributing to a total of over $15 million raised for critical research, patient support, and advocacy programs [1]

Company Performance - Builders FirstSource (BLDR) closed at $127.11, down 1.12% from the previous trading session, underperforming the S&P 500's gain of 0.37% [1] - The company's shares have decreased by 13.85% over the last month, while the Retail-Wholesale sector gained 0.38% and the S&P 500 gained 4.26% [1] Upcoming Earnings - The upcoming earnings release is projected to show earnings per share (EPS) of $1.69, reflecting a 44.95% decrease from the same quarter last year [2] - Revenue is anticipated to be $3.8 billion, indicating a 10.26% decline from the same quarter last year [2] Annual Forecast - Zacks Consensus Estimates forecast earnings of $6.72 per share and revenue of $15.18 billion for the year, representing changes of -41.87% and -7.42% respectively compared to the previous year [3] - Recent changes to analyst estimates indicate evolving short-term business trends, with positive revisions reflecting analyst optimism [3] Stock Performance and Valuation - The Zacks Rank system currently rates Builders FirstSource as 5 (Strong Sell), with a 5.37% fall in the Zacks Consensus EPS estimate over the past month [5] - Builders FirstSource has a Forward P/E ratio of 19.14, which is in line with the industry average [6] - The company has a PEG ratio of 14.39, significantly higher than the average PEG ratio of 7.56 for the Building Products - Retail industry [7] Industry Context - The Building Products - Retail industry is part of the Retail-Wholesale sector and currently holds a Zacks Industry Rank of 234, placing it in the bottom 6% of over 250 industries [8] - The Zacks Industry Rank assesses the strength of industry groups, with top-rated industries outperforming the bottom half by a factor of 2 to 1 [8]

Group 1 - The article highlights a compelling investment opportunity in Builders FirstSource (NYSE: BLDR) due to a combination of a cyclical catalyst, historical outperformance, and strong financials [1] - It suggests that lower interest rates will soon become apparent to the broader market, making it an opportune time to accumulate shares of Builders FirstSource [1] - The investment strategy discussed involves a macroeconomic approach, identifying strong economies and sectors likely to perform well, followed by a focus on quality companies with solid momentum [1] Group 2 - The analyst intends to initiate a long position in Builders FirstSource in the upcoming week, indicating confidence in the company's future performance [2] - There is no current stock or derivative position held by the analyst in any mentioned companies, ensuring an unbiased perspective [2] - The article emphasizes that past performance does not guarantee future results, underscoring the importance of careful investment consideration [3]