NEW YORK ( TheStreet) -- Shares of Beacon Roofing Supply ( BECN) rose Monday despite a shortfall in the company's fiscal fourth-quarter results.

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.

"We started to see some gains in residential business later in the year in a few of our regions that did not benefit from storms last year," Buck said. "Our operating expenses were well-controlled and we achieved a substantial build-up of cash in the fourth quarter. We believe the favorable long-term industry growth factors remain in place and we are in a good position to expand our Company in 2011."

Jefferies said it was looking for sales of $500 million in the September quarter, and it left its hold rating in place, citing caution because of "current market headwinds and a lack of catalysts."

The firm expects Beacon could up its acquisition pace in its fiscal 2011 because of its healthy balance sheet and demonstrated fiscal discipline in this area after it made $19 million worth of deals in fiscal 2010 while still reducing debt by $14 million.

In comments released after the conference call, the firm gave a bit of color on what Monday's buyers of the stock may be hanging their hats on.

"Inventories at roofing distributors appear to have normalized -- we note high inventory levels during the summer time resulted in intense pricing competition during the destocking phase," Jefferies said.

So while a material boost to the business will have to wait until the construction market turns a corner along with the broad U.S. economy, some of the market pressures on margins seem to have been alleviated.

The majority of analysts covering Beacon share Jefferies' opinion of the stock with seven of the 12 rating it at hold against three at strong buy and two at buy. The median 12-month price target for the stock sits at $17.50. The bar is a bit lower for the company's performance in the current quarter as Wall Street is looking for earnings of 15 cents a share on revenue of $386.5 million.

-- Written by Michael Baron in New York.

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