I believe investors do well to cast a skeptical gaze at companies that chronically blame factors outside their control for ongoing underperformance, but in the case of Headwaters (NYSE:HW), I do think that recent results have been meaningfully impacted by weather. While the shares certainly haven't been any sort of disaster since I last updated my coverage (up more than 12% since then), investors would have done much, much better with other building material stocks I've talked about before like Cemex (NYSE:CX), Louisiana-Pacific (NYSE:LPX) and Ply Gem (NYSE:PGEM) (the worst of which is up 40% over that same time period).
Headwaters has lagged those other building names over the past year, though, and I think at least some of that is due to the company's heavier reliance on southern markets like Texas, but also higher expectations going into last year (Headwaters' two-year performance is much more compelling relative to that group). Looking ahead, management has continued its plan of building out a diversified collection of construction materials businesses, while also looking to enhance the value of its fly ash and utility site service operations. While I'm not as bullish as some sell-side analysts appear to be, I think a fair value in the neighborhood of $20 is still credible and that the shares could do even better if the weather co-operates.
With Headwaters, Bad Weather Means Opportunity