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JELD-WEN Holding, inc. (JELD) REPORT Gabelli research analyst Alvaro Lacayo (2-1-2018)

JELD-WEN Holding, inc. (JELD) REPORT Gabelli research analyst Alvaro Lacayo (2-1-2018)


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Good afternoon my name is Alvaro Lacayo and I am the housing research analyst at Gabelli & Co.
I wanted to provide an update on Jeld Wen Holdings and recommend it as my best idea for 2018.

Jeld wen has an equity market cap of $4.4BN and an enterprise value of $5.5BN.

Towards the end of 2017 and into 2018 we have seen an acceleration in housing demand driven by improved consumer sentiment, storm related construction recovery and improving macro fundamentals.

As we begin to think about 2018 we see demand for single family housing continuing to rise at a high single digit pace while repair and remodel should continue to see 3-5% growth. These growth drivers should underpin soild demand for building products and in particular windows and doors.

As one of two major players in interior residential doors and as one of the largest windows manufacturers in the US JELD WEN is well positioned to drive strong revenue growth and profit improvement through 2020.

While there are some concerns in building products with regards to raw materials we believe those companies with solid pricing power will be able to more than offset inflation.
Given JELD Wen’s position in the market we see solid 1-2% pricing and 3-4% volume driving 4-6% organic growth over the next two years.

In Europe and in Australia we see longer term organic growth rates in the 3-4% range. Furthermore,
JELD WEN will supplement organic growth with a consistent M&A pipeline that is supported by strong free cash flow.

As a combined company we think organic growth will be 3-5% and M&A should be able to contribute 2-4% per year. We see revenues growing to $4.4BN in 2020 from 3.7BN in 2016 and EBITDA reaching $655mm up from $393mm during that same time period.

We believe over the next 12-18 months the stock will have a private market value approaching $50 and could offer more upside if strength in housing continues beyond 2020. We recommend investors Buy the shares