Jefferies & Co. attributed the surprising surge in the stock to a demand uptick since the quarter wrapped up in September, as indicated by Beacon's management team on the company's conference call.
"We believe the shares are up due to positive momentum in Oct/Nov business," the firm said in a note to clients. "However, we note 2011 performance will be dependent on strength of residential and non-residential market recovery.
Jefferies, which has a hold rating and 12-month price target of $16 on the stock, said Beacon's business was up 2% year-over-year in October, and has risen in the mid-single digits for November.The stock was tacking on $1.42, or 9%, to $17.17 on volume of 1.23 million in late trades. Based on Friday's close at $15.75, the shares were down 1.5% year-to-date, ranging from a 52-week high of $23.11 on April 30 to a low of $13.52 on Aug. 25. Earlier in the session, the stock sank as low as $14.99. Before the opening bell, Beacon said it earned $16.9 million, or 37 cents a share, for the three months ended Sept. 30 with sales down 1.1% year-over-year to $487.7 million. In the same period a year earlier, the company posted a profit of $19 million, or 42 cents a share. The average estimate of analysts polled by Thomson Reuters was for earnings of 41 cents a share in the September period on revenue of $496 million, marking the fourth straight quarter that Beacon's performance has come in below Wall Street expectations. Peabody, Mass.-based Beacon attributed the profit decline to lower gross margins as average selling prices declined from a year ago and said acquisitions in 2010 kept the overall sales decline in the quarter in check. CEO Robert Buck took a positive view of the year ahead, highlighting the company's bulging cash balance, which rose to $117 million at the quarter's end from $83 million last year, a 41% jump.