Core Insights - Eminence Capital has fully exited its position in Installed Building Products, selling 945,101 shares for approximately $170 million, marking a significant change in its investment strategy [1][2][10]. Company Overview - Installed Building Products, Inc. operates in the U.S. residential and commercial construction markets, focusing on the installation and distribution of insulation and complementary building products [5][9]. - The company reported a total revenue of $2.97 billion and a net income of $255.70 million for the trailing twelve months (TTM) [4]. Financial Performance - As of November 13, 2025, shares of Installed Building Products were priced at $257.14, reflecting a 26.0% increase over the past year, outperforming the S&P 500 by 13.44 percentage points [3][10]. - The company's dividend yield stands at 1.25% [4]. Business Model - Installed Building Products employs a vertically integrated business model, combining installation, distribution, and manufacturing to serve builders across the United States [9][14]. - The company focuses on both new construction and retrofit markets, leveraging a diversified product portfolio to provide value-added services [5][9]. Market Position and Strategy - Installed Building Products has transformed from a small insulation contractor into one of the largest installation platforms in the U.S., primarily generating revenue through installation services and product distribution [11][6]. - The company aims to continue its growth by acquiring well-run regional installers and integrating them into its operations, positioning itself as a consolidator in a fragmented industry [11][12]. Recent Developments - The complete sale of Installed Building Products shares by Eminence Capital indicates a strategic shift, as the stake previously represented 2.1% of the fund's assets under management [2][7]. - The decision to exit after a year of strong performance raises questions about the long-term growth potential of Installed Building Products and its ability to maintain attractive returns on acquisitions [10][12].

Group 1 - Installed Building Products (IBP) is currently ranked 1 (Strong Buy) in the Zacks Rank system, indicating strong potential for outperforming the market in the near term [3] - The Zacks Consensus Estimate for IBP's full-year earnings has increased by 9.6% over the past quarter, reflecting improved analyst sentiment and a more positive earnings outlook [4] - IBP has achieved a year-to-date return of 51.8%, significantly outperforming the average gain of 4.7% in the Construction sector [4] Group 2 - Installed Building Products is part of the Building Products - Miscellaneous industry, which includes 33 stocks and currently ranks 97 in the Zacks Industry Rank [6] - Stocks in the Building Products - Miscellaneous industry have, on average, lost 2.8% this year, further highlighting IBP's strong performance relative to its peers [6] - Advanced Drainage Systems (WMS), another stock in the Construction sector, has a year-to-date return of 32.1% and a Zacks Rank of 2 (Buy), indicating solid performance as well [5]

Core Viewpoint - Installed Building Products (IBP) has received an upgrade to a Zacks Rank 1 (Strong Buy), indicating a positive outlook based on rising earnings estimates, which are a significant factor influencing stock prices [1][4][6]. Earnings Estimates and Ratings - The Zacks rating system focuses on changes in earnings estimates, which are tracked through the Zacks Consensus Estimate, reflecting EPS estimates from sell-side analysts for the current and following years [2]. - The Zacks rating upgrade for IBP signifies an improvement in the company's earnings outlook, likely leading to a favorable impact on its stock price [4][6]. Impact of Earnings Estimate Revisions - There is a strong correlation between earnings estimate revisions and near-term stock price movements, making it beneficial for investors to track these revisions [7]. - The Zacks Rank system effectively utilizes earnings estimate revisions to classify stocks, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8]. Specifics on Installed Building Products - For the fiscal year ending December 2025, IBP is expected to earn $11.03 per share, with no year-over-year change; however, the Zacks Consensus Estimate has increased by 9.6% over the past three months [9]. - The upgrade to Zacks Rank 1 places IBP in the top 5% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [11].

Core Viewpoint - Arcosa (ACA) is currently viewed as a superior value opportunity compared to Installed Building Products (IBP) based on various financial metrics and earnings outlook [1][7]. Valuation Metrics - ACA has a forward P/E ratio of 22.89, while IBP has a forward P/E of 23.61, indicating that ACA is relatively cheaper [5]. - The PEG ratio for ACA is 1.43, suggesting a more favorable valuation in relation to its expected earnings growth compared to IBP's PEG ratio of 4.52 [5]. - ACA's P/B ratio stands at 1.86, significantly lower than IBP's P/B ratio of 9.78, further supporting ACA's valuation advantage [6]. Earnings Outlook - ACA is experiencing an improving earnings outlook, which is a positive indicator in the Zacks Rank model, contrasting with IBP's less favorable position [3][7].

Group 1 - Artisan Partners' "Artisan Small Cap Fund" reported strong performance in Q3 2025, with the Investor Class fund returning 8.69%, Advisor Class fund at 8.75%, and Institutional Class fund at 8.73%, while the Russell 2000 Growth Index returned 12.19% [1] - Major US indices, including Russell 1000®, Russell Midcap®, and Russell 2000®, reached record highs during the quarter, contributing to a double-digit year-to-date gain for global equities [1] Group 2 - Installed Building Products, Inc. (NYSE:IBP) was highlighted as a key stock, with a one-month return of -8.20% and a 52-week gain of 18.29%, closing at $244.76 per share with a market capitalization of $6.639 billion on November 17, 2025 [2] - Artisan Small Cap Fund expressed confidence in IBP's growth potential, citing factors such as rising new home completions, geographic expansion, and increased revenue per project through cross-selling [3] - The company was moved to the CropSM prior to its earnings announcement, indicating a belief that the worst of the residential market challenges may be behind it, with expectations for improved residential performance and new commercial market opportunities [3]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - The company reported a 2% increase in consolidated sales for the third quarter, reaching a record $778 million, with same-branch sales remaining roughly flat [12]. - The heavy commercial end market was a significant driver of sales growth, with a 12% increase in commercial same-branch sales, while residential same-branch sales declined by 3% [12][5]. - The company has been actively acquiring businesses to enhance its product offerings and market presence, including a North Carolina manufacturer with annual revenue of $20 million [6] and several other acquisitions totaling approximately $19 million in annual sales [7]. Sales Performance - Same-branch new single-family installation sales decreased by 2%, while multifamily installation sales fell by 7% [1]. - Despite the challenges in the residential market, the company has seen growth in complementary product sales by double digits compared to the previous year [1]. - The heavy commercial segment continues to show strong performance, with expectations for sustained sales and profitability beyond 2025 [5]. Financial Highlights - The company returned nearly $213 million to shareholders through dividends and stock repurchases during the nine months ended September 30, 2025 [2]. - Adjusted EBITDA for the third quarter reached a record $140 million, reflecting an adjusted EBITDA margin of 18% [14]. - Cash flow from operating activities increased by 16% to $307 million, primarily due to improvements in working capital management [15]. Market Outlook - The outlook for new residential construction in 2026 is expected to be flat compared to 2025, influenced by consumer confidence and housing affordability challenges [8]. - The company anticipates that multifamily housing will continue to meet the needs of growing markets, particularly for individuals facing housing affordability concerns [8][9]. - The company remains optimistic about the long-term fundamentals of the US housing construction industry, despite current market challenges [3][10]. Operational Efficiency - The company has maintained a disciplined approach to managing selling and administrative expenses, which decreased as a percentage of sales [14]. - The adjusted gross margin for the third quarter improved to 34%, up from 33.8% in the prior year, attributed to a favorable shift in customer, product, and geographic mix [13]. - The company is focused on capital allocation to achieve attractive returns while distributing excess cash to shareholders [16]. Regional Performance - The Midwest and Northeast regions showed low single-digit sales growth, while the South remained flat and the West experienced a slight decline [31]. - The company has benefited from its strong market share in the Midwest and Northeast, which have performed better relative to other regions [31][32]. - The performance of the heavy commercial business has helped offset weaknesses in the light commercial segment [23]. Acquisition Strategy - The company is actively seeking well-run businesses that align with its strategic goals and support attractive returns on invested capital [6]. - The residential installation market remains fragmented, presenting considerable opportunities for consolidation [6]. - The company has a robust pipeline for potential acquisitions, particularly in the heavy commercial sector, which is expected to drive future growth [78].

Financial Performance - Net revenue for the three months ended September 30, 2025, increased by 2.3% to $778.2 million, driven by an 11.7% increase in commercial end market same branch sales growth and contributions from recent acquisitions [120][130]. - Gross profit for the same period rose by 2.9% to $264.2 million, with a gross profit margin of 34.0%, reflecting improvements in selling price and product mix [120][130]. - Consolidated sales growth for the nine months ended September 30, 2025, was 1.5%, compared to 6.5% in the same period of 2024 [125]. - Same branch sales growth in the residential market declined by 2.8% for the three months ended September 30, 2025, primarily due to a 4.8% decline in sales volume [130]. - Commercial sales growth for the same period increased by 12.2%, with same branch sales growth of 11.7% [125][130]. Shareholder Returns - Cash and cash equivalents as of September 30, 2025, totaled $333.3 million, allowing the company to increase its quarterly dividend by 6% to $0.37 per share, totaling $10.1 million [121]. - The company repurchased $51.5 million of its common stock during the three months ended September 30, 2025, resulting in a total capital return to shareholders of $61.6 million [121]. Operating Expenses - Operating expenses for the three months ended September 30, 2025, included selling expenses of $36.2 million and administrative expenses of $111.1 million, representing 4.7% and 14.3% of total net revenue, respectively [133]. Interest and Taxation - Interest expense, net, decreased by 10.4% to $6.9 million for the three months ended September 30, 2025, due to lower interest expenses from prior year term loan repricing [137]. - Income tax provision for the three months ended September 30, 2025, was $25.9 million, with an effective tax rate of 25.8% [138]. Cash Flow and Liquidity - Net cash provided by operating activities increased to $306.5 million for the nine months ended September 30, 2025, from $265.2 million in 2024 [155]. - Working capital, including cash and cash equivalents, decreased to $663.0 million as of September 30, 2025, from $695.9 million at the end of 2024 [154]. - The company had total liquidity of $579.8 million as of September 30, 2025, consisting of $333.3 million in cash and cash equivalents and $250.0 million available under a credit facility [147]. - The company expects to meet its short-term liquidity requirements primarily through net cash flows from operations and available borrowing capacity [149]. Debt and Financing - As of September 30, 2025, the outstanding balance on the Term Loan was $489.2 million, net of unamortized debt issuance costs [166]. - The ABL Credit Agreement was amended to increase the commitment under the asset-based lending credit facility to $250.0 million, with the potential to increase to $300.0 million [168]. - The ABL Revolver had remaining availability of $246.5 million as of September 30, 2025 [168]. - Total outstanding loan balances related to Master Loan and Equipment Agreements were $92.0 million as of September 30, 2025, up from $82.3 million as of December 31, 2024 [174]. - The company had $226.8 million in total bonds and letters of credit as of September 30, 2025 [176]. - The company was in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement, and Senior Notes as of September 30, 2025 [171]. Risk Management - The company had three active interest rate swaps hedging $400.0 million of variable cash flows on the Term Loan through December 14, 2028 [172]. - A hypothetical one percentage point increase in interest rates on variable rate debt would increase annual interest expense by approximately $0.9 million [181]. - The company has not entered into derivatives for trading or speculative purposes [182]. - The Senior Notes accrue interest at a fixed rate of 5.75% [181]. Strategic Outlook - The company’s strategy includes enhancing procurement efforts through vertical integration in select product and end markets, contributing to a 29.8% increase in sales within its Distribution and Manufacturing businesses [130]. - The company anticipates continued pressures from elevated mortgage rates impacting housing demand through 2025 and into 2026 [141]. - The company expects to spend cash for acquisitions of companies with at least $100.0 million in aggregate net revenue each fiscal year [148]. Other Comprehensive Income - Other comprehensive loss for the three months ended September 30, 2025, was $(2.2) million, compared to $(10.6) million in 2024 [139]. - The company recorded unrealized losses of $2.3 million on cash flow hedges for the three months ended September 30, 2025, due to market expectations for lower interest rates [139].

Financial Data and Key Metrics Changes - Consolidated net revenue for Q3 2025 increased 2% to a record $778 million compared to $761 million for the same period last year [16] - Adjusted EBITDA for Q3 2025 increased to a record $140 million, reflecting an adjusted EBITDA margin of 18% [18] - Adjusted net income increased to $86 million or $3.18 per diluted share [18] - Cash flow from operating activities increased 16% to $307 million for the nine months ended September 30, 2025 [10][18] - Adjusted gross margin for Q3 2025 was 34%, up from 33.8% in the prior year period [17] Business Line Data and Key Metrics Changes - Same branch sales for the installation segment were flat for Q3, with a 12% increase in commercial same branch sales offset by a 3% decline in residential same branch sales [16] - Third quarter installation sales in the multifamily end market were down 7% on a same branch basis [9] - Heavy commercial same branch sales growth exceeded 30% during Q3 2025 [17] - Same branch new single-family installation sales were down 2% [9] Market Data and Key Metrics Changes - Single-family starts year-to-date through August 2025 decreased by 5% from the prior year, while multifamily starts decreased by 15% for the same period [12] - The South region, which represents about 45% of residential sales, was essentially flat in the quarter, while the West region, accounting for roughly 20% of residential sales, was down very low single digits [42] Company Strategy and Development Direction - The company remains focused on growing earnings and cash flow while diligently deploying capital to shareholders, having returned nearly $213 million to shareholders through dividends and stock repurchases [8] - The company is pursuing acquisitions in well-run businesses that support attractive returns on invested capital, particularly in the fragmented residential installation market [11] - The company is optimistic about the long-term fundamentals of the U.S. housing construction industry despite current challenges [8][13] Management's Comments on Operating Environment and Future Outlook - Management expects residential housing starts to be flat compared to 2025, influenced by consumer confidence and buyer activity during the spring home selling season [13] - The company believes it operates from a position of strength and is flexible in navigating potential near-term challenges [14] - Management noted that while there are headwinds in the multifamily market, they are strategically gaining market share [25] Other Important Information - The company published its 2025 ESG report, highlighting efforts in environmental sustainability and community engagement [8] - The company has a net debt to trailing twelve-month adjusted EBITDA leverage ratio of 1.09 times, well below the target of 2 times [19] - The fourth quarter dividend of $0.37 per share represents a 6% increase over the prior year period [20] Q&A Session Summary Question: What is the outlook for multifamily and commercial backlogs? - Management indicated that while there are continued headwinds in the multifamily market, they are seeing building of backlogs and gaining share in new markets [24][25] Question: Are there any delays in the commercial side? - Management noted that while there are no widespread project delays, some select markets are experiencing delays, particularly influenced by the trades that come before them [32] Question: How is the company performing relative to competitors? - Management stated that they have outperformed the market opportunity, particularly with regional and local builders, despite headwinds in the entry-level market [50][51] Question: What are the expectations for pricing and gross margins? - Management expects continued pricing pressure in the entry-level market but is confident in maintaining margins through effective service and value provided to builders [129] Question: What is the growth outlook for the heavy commercial segment? - Management expressed confidence in the heavy commercial business continuing to deliver strong results, with significant opportunities for organic growth [115][120]

Company Overview - Installed Building Products (IBP) operates a national platform of over 250 locations serving 48 continental states and the District of Columbia[17] - IBP's revenue diversification shows insulation accounted for 78% of revenue in 2015, decreasing to 60% in 2024, while other building products increased from 6% to 16%[23] - IBP's end-market diversification shows new single-family homes accounted for 75% of revenue in 2015, decreasing to 57% in 2024, while new multi-family homes increased from 6% to 16% and commercial projects increased from 11% to 18%[23] - Established IBP branches with diversified revenue generate approximately $4,400 per residential permit, while developing branches generate approximately $2,200 per permit[35] Financial Performance - IBP generated over $1 billion in free cash flow in five years[39] - IBP's target leverage ratio is less than 200x, with a ratio of 109x as of September 30, 2025[44] - From 2020 to 2024, IBP allocated $579 million (50%) to acquisitions, $246 million (21%) to dividends, and $323 million (28%) to share repurchases, totaling $115 billion[47] - IBP's net revenue grew from $19687 million in 2021 to $29735 million in the last twelve months (LTM) ending September 30, 2025, representing a 21% growth[58] - IBP's adjusted EBITDA increased from $2854 million in 2021 to $5083 million in the LTM ending September 30, 2025[58] - IBP's adjusted gross profit margin improved from 300% in 2021 to 337% in the LTM ending September 30, 2025[58]