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GMS shares target cut, keeps Buy rating on weaker outlook

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Tuesday, DA Davidson adjusted its outlook on GMS Inc . (NYSE: NYSE:), a leading North American distributor of wallboard and suspended ceilings systems, reducing the stock’s price target to $97 from $105, while still recommending a Buy rating for investors.

The revision follows GMS’s fourth-quarter earnings report last week, which showed results largely in line with expectations but presented a softer forecast for the first quarter of fiscal year 2025.

The company’s stock value has seen a decline of approximately 10% since the earnings announcement. DA Davidson’s analyst noted the current market conditions as “choppy,” with certain factors negatively influencing near-term (NT) gross margins. Despite these challenges, the analyst highlighted that the wallboard pricing environment continues to be stable and healthy.

Moreover, there is an indication of increased demand in the single-family housing sector, which is beginning to emerge more significantly. This demand is a positive sign for GMS, which specializes in products for residential and commercial construction.

In response to the updated company outlook and market conditions, DA Davidson has revised its EBITDA forecast for GMS for the fiscal year 2025 downward by 5%. The new stock price target of $97 reflects this revised forecast but the firm maintains its Buy rating, signaling confidence in the company’s long-term performance despite the short-term headwinds.

GMS Inc. has not publicly responded to the revised price target. Investors and market watchers will be keeping a close eye on the company’s performance in the upcoming quarters to see if the predicted stabilization in wallboard prices and the uptick in single-family demand will positively affect the company’s financials.

In other recent news, GMS Inc. reported record net sales of $5.5 billion for the full fiscal year 2024, with fourth-quarter net sales increasing by 8.4% to $1.4 billion. The company also posted a net income of $56.4 million and an adjusted EBITDA of $146.6 million for the same period. In anticipation of changes in end market dynamics, GMS predicts improvements in single-family construction to balance out challenges in multifamily and commercial markets in fiscal 2025.

GMS also plans to continue its growth strategy through acquisitions and initiatives like the Yard of the Future. The company has agreed to acquire Yvon supply company, expecting the transaction to enhance margins.

Despite a decline in gross margin due to steel price deflation, GMS expects wallboard pricing to remain resilient and anticipates renewed inflationary periods. These are recent developments that highlight the company’s strategic approach to navigate the complex market environment.

InvestingPro Insights

As investors weigh DA Davidson’s revised outlook on GMS Inc., real-time data and expert analysis from InvestingPro offer additional dimensions to consider. GMS’s stock is currently perceived as being in oversold territory according to the RSI metric, suggesting potential for a rebound. Moreover, the company’s liquid assets have been noted to exceed its short-term obligations, indicating a strong liquidity position that could weather short-term market volatility.

On the valuation front, GMS boasts a P/E Ratio of 11.83, with a slight adjustment in the last twelve months of 2024 to 11.52, reflecting a modest valuation relative to earnings. The company has maintained a steady revenue growth of 3.24% in the same period, which could be a sign of underlying business strength amidst market fluctuations.

Still, it is important to note that the stock has experienced significant price declines over the past week and month, with a 10.39% and 15.44% drop respectively, which may have factored into the revised price target from DA Davidson.

For investors looking for a deeper dive into GMS’s financials and future prospects, there are additional InvestingPro Tips available that could provide further guidance. For instance, analysts predict profitability for the year, and the company has a history of strong returns over the last decade. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With a total of 11 additional tips listed on InvestingPro for GMS, investors can gain a comprehensive understanding of the company’s potential.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

SCWO Stock Hits 52-Week Low at $0.71 Amid Market Challenges

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In a challenging market environment, shares of 374Water (SCWO) have touched a 52-week low, dipping to $0.71. The company, with a market capitalization of $104 million, maintains a strong liquidity position with a current ratio of 3.81 and more cash than debt on its balance sheet, according to InvestingPro data. The company, which specializes in water treatment solutions, has seen its stock price struggle significantly over the past year, reflecting a broader trend in the sector. Investors have been cautious, as evidenced by the stock’s 1-year change, which shows a substantial decline of 52.96%. InvestingPro analysis indicates the stock is currently in oversold territory, with 18 additional investment insights available to subscribers. This downturn highlights the volatility faced by environmental technology companies and raises concerns about future performance amidst uncertain market conditions. With a beta of -0.51, the stock typically moves opposite to market direction, potentially offering diversification benefits.

In other recent news, 374Water Inc. has secured approximately $12.2 million through a registered direct offering, involving the sale of common stock and warrants. The cleantech company expects the gross proceeds before fees and expenses to be around the $12.2 million mark, with D. Boral (OTC:) Capital LLC serving as the exclusive placement agent for the offering. The capital infusion is scheduled to be finalized by November 18, 2024, pending customary closing conditions.

In further developments, 374Water has initiated operations of its AirSCWO technology at the Iron Bridge Regional Water Reclamation Facility in Orlando. This marks a significant step in commercial biosolids processing, with the technology designed to efficiently process biosolids and PFAS contaminated wastes. The successful integration of the AirSCWO system into the Iron Bridge facility demonstrates the company’s capacity to destroy persistent organic pollutants, including PFAS.

The Florida Department of Environmental Protection supported the installation with a grant under the Bilateral Infrastructure Law emerging contaminant funding. Notably, CEO Chris Gannon highlighted the operational success in Orlando as crucial for showcasing the technology’s capacity to manage municipal, federal, and industrial organic waste streams at scale. The company anticipates additional commitments across the United States, including a deployment to Orange County Sanitation (CA) in 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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Global shares and dollar firm in muted pre-Christmas trade

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By Alden Bentley, Samuel Indyk and Rae Wee

NEW YORK/LONDON (Reuters) -Wall Street topped off a global share rally in thin trade on Thursday as markets prepared for early Christmas Eve closes, while the dollar was buoyed by firmer Treasury yields and speculation that the Federal Reserve would slow its easing in 2025.

The was 0.47% higher in late morning trade, the rose 0.73% and the rose 0.99%.

U.S. stock trading wraps up at 1:00 p.m. EDT/1800 GMT, and the bond market closes at 2:00 p.m. Most financial centers around the world are closed on Wednesday for Christmas. The U.S. reopens on Thursday, while many financial centers have a second day off.

“Meagre news and data flow should keep the focus on a more hawkish Fed,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

MSCI’s gauge of stocks across the globe went up more than half a percent. The pan-European index rose 0.18%. 100 rose 0.19% and 40 rose 0.14%. German stocks were closed for the Christmas holiday.

In Asia, Chinese stocks rose after sources told Reuters that Beijing planned to issue a record amount of special treasury bonds next year as it ramps up fiscal stimulus to revive a faltering economy.

The blue-chip index and both ended 1.3% higher. Hong Kong’s advanced 1.1%.

The news came shortly after China’s finance ministry said authorities would ramp up fiscal support for consumption next year by raising pensions and medical insurance subsidies for residents, as well as expanding consumer goods trade-ins.

Still, investors remain cautious on the outlook for the world’s second-largest economy, particularly as it faces the threat of hefty tariffs from U.S. President-elect Donald Trump.

Elsewhere, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.37%.

FED FOCUS

Investors are taking direction from last week’s 25 basis point Fed interest rate cut, its signals on the strength of the economy and its slow progress bringing inflation down to its 2% target. Markets are now pricing in about 35 basis points of easing for 2025, implying one quarter-point rate cut and around a 40% chance of a second.

U.S. Treasury yields pared gains after the Treasury saw solid demand for a $70 billion sale of five-year notes, but remained higher on the day. The two-year Treasury yield, which is sensitive to changes in Fed rate expectations, was up 0.9 bp at 4.359%, while the benchmark 10-year yield rose 2.6 bp to 4.625%, reaching a seven-month high at 4.629%. [US/]

“Like markets, the Fed will need to consider U.S. policies on tariffs and immigration in its inflation and growth outlook. We believe the subtle slowing in the U.S. labor market will still be the Fed’s paramount concern,” said analysts at Citi Wealth.

“While always uncertain, our base case expectation for a 3.75% policy rate is unchanged. It’s a far cry from the 1.7% U.S. policy rate average of the past 20 years.”

The Fed’s cut was the third one this cycle, taking the Fed funds rate to 4.25%-4.5%.

Ahead of Trump’s return to the White House in January, global central banks have urged caution over their rate paths due to uncertainty on how his planned tariffs, lower taxes and immigration curbs might affect policy.

Data on Monday showed U.S. consumer confidence unexpectedly weakened in December as the post-election euphoria fizzled and concerns about future business conditions emerged.

In currencies, the rose 0.14% hovering near a two-year high hit Monday, having climbed more than 2% in December so far.

The euro eased 0.15% to $1.0389, while the yen languished near last week’s five-month low, trading at 157.35 per dollar.

Japan’s Finance Minister Katsunobu Kato on Tuesday reiterated Tokyo’s discomfort with excessive foreign exchange moves and put speculators on notice that authorities are ready to act to stabilise a faltering yen.

© Reuters. FILE PHOTO: The German stock exchange is decorated for the Christmas season as the German share price index DAX graph is pictured in Frankfurt, Germany, December 23, 2024.    REUTERS/Staff/File Photo

rose 0.13% to $2,616.26 an ounce, having risen about 27% this year, heading for its biggest yearly gain since 2010.

rose 1.56% to $70.32 a barrel and rose to $73.73 per barrel, up 1.51% on the day. [O/R]

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Wall Street advances in short Christmas Eve session on megacap gains

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By David French

(Reuters) -Wall Street’s main indexes all ended higher on Tuesday, with gains in megacap and growth stocks bolstering benchmarks in a truncated Christmas Eve session.

Both the and the scored four straight sessions of gains. For the Dow, the run follows its 10-session skid earlier this month, its longest losing streak since 1974.

The benchmarks closed higher on the first day of a historically strong period called the “Santa Claus rally.” The on average has gained 1.3% in the last five days of December and first two days of January, according to data from the Stock Trader’s Almanac going back to 1969.

With megacap stocks having outsized influence on markets, their performance is often a key driver of indexes. When coupled with reduced trading volumes and few other catalysts, as many investors take time off for the holidays, this is even more pronounced.

All the so-called Magnificent Seven megacap technology stocks climbed on Tuesday, led by Tesla (NASDAQ:).

The automaker’s rise helped push consumer discretionary shares higher, making them the top gaining sector in the S&P.

Elsewhere, chip manufacturers were also buoyant. Broadcom (NASDAQ:) and Nvidia (NASDAQ:) were up, while Arm Holdings (NASDAQ:) climbed a day after losses from losing a court case.

Growth names rose despite U.S. Treasury interest rates remaining elevated – the benchmark 10-year note yielded around 4.61% on Tuesday. Traditionally, higher debt costs crimp growth stocks.

However, the long-term themes around technology development, including advancements in artificial intelligence, overshadow any near-term moves in Treasuries, said Charlie Ripley, senior investment strategist for Allianz (ETR:) Investment Management.

“This reinforces that view that the sector is going to remain strong, and should be well into the new year,” he said.

According to preliminary data, the S&P 500 gained 64.93 points, or 1.09%, to end at 6,039.00 points, while the Nasdaq Composite gained 264.31 points, or 1.34%, to 20,029.19. The Dow Jones Industrial Average rose 366.75 points, or 0.85%, to 43,273.70.

Stock markets shut at 1:00 p.m. ET on Tuesday and will be closed for Christmas on Wednesday.

After a stellar run to record highs following the November election, which sparked hopes of pro-business policies under U.S. President-elect Donald Trump, Wall Street’s rally hit a bump this month as investors grappled with the prospect of higher interest rates in 2025.

The U.S. Federal Reserve eased borrowing costs for the third time this year last Wednesday, but signaled only two more 25-basis-point reductions next year, down from its September projection of four cuts, as policymakers weigh the possibility of Trump’s policies stoking inflation.

Allianz’s Ripley said the themes which had driven the market higher in the past two months remained intact, and actions by the Fed had not killed the rally.

“Heading into 2025, things are set up with good positioning,” he said, noting factors including economic outlook, consumption in the U.S. and the labor market.

© Reuters. FILE PHOTO: A Christmas tree is seen outside of the New York Stock Exchange (NYSE) at Wall St and Broad St. in New York City, U.S., December 13, 2023.  REUTERS/Brendan McDermid/File Photo

Crypto-related stocks traded higher on Tuesday, including Microstrategy (NASDAQ:), Riot Platforms (NASDAQ:), and MARA Holdings, as the price of bitcoin advanced.

NeueHealth soared after the healthcare provider said New Enterprise Associates, its largest shareholder, and a group of existing investors will take the company private in a $1.3 billion deal.

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