Stephens Lowers Price Target on GMS to $95 Following Recent Earnings

Stephens analysts reduced their price target for GMS (NYSE:GMS) to $95 from $112, while maintaining an Overweight rating on the stock. The analysts explained that GMS’s recent earnings release has increased uncertainty regarding near-term pricing dynamics in the wallboard distribution sector.

Although manufacturers have had some success with price hikes earlier this year, GMS has experienced delays in passing these increases on to its customers. This situation is expected to improve in the coming months, potentially mitigating the negative impact of product mix as residential demand is anticipated to surpass commercial demand in the near future.

Additionally, fluctuating steel prices are creating short-term margin pressures. Despite discussions about possible price increases, current guidance assumes that steel pricing will remain subdued. Although the immediate outlook does not appear particularly promising, the analysts believe that the pricing environment for GMS will improve in the upcoming quarters. Following a recent pullback, they also noted that GMS’s valuation is among the most attractive in the building product distribution sector.