Builders FirstSource (NYSE: BLDR) is on a shopping spree

Builders FirstSource (NYSE: BLDR), the largest supplier of structural building products for new residential construction in the US, may have had a tough last quarter, but that’s not stopping it from advancing with a buying spree of both other companies and its own shares. Amid a still challenging macro environment with higher interest rates that have slowed down new projects across the industry, the company says it’s fully committed to deploying $5.5 billion to $8.5 billion through 2026 on what it deems “high-return opportunities.”

“We continue to allocate capital in a disciplined manner with a proven M&A strategy and a track record of buying back shares at attractive prices over the long-term,” CEO Dave Rush said earlier this month in an earnings call, noting that the company had completed three new acquisitions in the second quarter. “Our M&A pipeline remains healthy, and we believe we can continue to acquire in a fragmented market.”

The company’s board in August authorized the repurchase of up to $1 billion of its stock after it bought back a similar amount in the second quarter. Since beginning a buyback program in 2021, Builders FirstSource has reduced total shares outstanding by 45% in a move that supports the price by making supply more limited. That helps explain why they’ve risen 2.7% over the past month even after reported declines in both revenue and net profit during the last quarter. Over the past year, the company’s shares have risen 23%. Kingspan Group (CBOE: KRX), an Irish competitor, fell 1.7% over the same period.

While Rush said momentum in new single-family housing had slowed as highly anticipated interest rate cuts had still not materialized, the company has been working with customers to help lower costs and address inflationary pressures that are still rippling through the economy. He said a new digital platform launched in February was on track to add $1 billion of incremental sales by 2026.

“Builders of all sizes are having to navigate affordability issues along with regulatory, land development and infrastructure challenges,” he said. “I am confident in the long-term strength of the industry due to the significant housing underbill and favorable demographic trends. We are well positioned to take advantage of those tailwinds.”

Help on the macro front, meanwhile, could soon be arriving with Federal Reserve chairman Jerome Powell saying earlier this month that “the time has come” to start cutting interest rates. Traders tracked by CME’s FedWatch tool are currently placing a 100% chance that easing will begin in September, with most expecting a 25-basis point cut. That, combined with the ongoing buybacks that will support shares, could put Builders FirstSource on solid ground for quarters to come. The company is also poised to benefit from the presidential election underway in the US as housing supply becomes an important topic of discussion among politicians working on solutions to address the deficit. Builders—and the companies that sell them supplies—could emerge as the real winners, regardless of which candidate comes out on top.