With it being a fairly slow news day, we wanted to a profile a
steel name that you're probably not familiar with, but that has been quietly
making new 52-week highs: Gibraltar Industries (ROCK 47.10, +0.60, +1.29%). The company is a
manufacturer of building products for residential, industrial, infrastructure,
and renewable energy markets.
In the Residential segment, products include roof and foundation ventilation products, mailboxes, trim, and flashings. In the Industrial/Infrastructure segment, products include perimeter security barriers, filtration, architectural facades, structural bearings, and expansion joints for bridges/roads. In its Renewable Energy segment, products include solar racks, and greenhouses etc. Customers include major home improvement retailers, wholesalers, industrial distributors, contractors, solar developers etc. ROCK operates 42 facilities, comprised of 30 manufacturing facilities, six distribution centers, and six offices.
ROCK has a leading market position in many of its product categories. In fact, management estimates that a majority of its sales were derived from the sale of products in which ROCK had one of the leading US market shares. Specifically, ROCK has leading market shares in five distinct product families: roof-related ventilation; postal and parcel storage; structural bearings and expansion joints for bridges and other structures; institutional and retail greenhouses; and fixed-tilt ground mount racking for photovoltaic (PV) solar systems.
A key goal for ROCK has been to boost its operating margins. A big part of this has been to focus more on value-added products, such as centralized mail systems and electronic package receptacles, expansion joints and structural bearings for roadways and bridges, roof and foundation ventilation products, solar racking systems, and greenhouses. These products use complex and demanding production processes that require advanced equipment, sophisticated technology and exacting quality control measures. Another key aspect to this is acquiring higher margin businesses. ROCK tends to be pretty active in terms of M&A. There are a lot of smaller, family-run businesses that make for good tuck-in acquisitions.
The stock jumped in late July on a very strong Q2 report with nice upside. ROCK benefited from strong domestic demand in the Renewable Energy & Conservation and Industrial & Infrastructure businesses, and from sales of new innovative products across its segments. Also, a greater mix of higher-margin products helped to boost margins. Q2 adjusted operating margin improved to 18.5% from 17.8% last year.
Looking ahead, ROCK is optimistic about the second half of the year. At the same time, it is cautious about the domestic and global volatility and competitive pressures related to the impact of tariffs. ROCK buys a lot of steel to make its products, so it is sensitive to steel prices. In addition, ROCK expects higher development costs as it executes on its new product initiatives.
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