DA Davidson has reaffirmed a Neutral rating on Builders FirstSource Inc. stock (BLDR), assigning a price objective of $111.00. The firm said it maintained the rating after reviewing the company’s fourth-quarter 2025 financial results and the current operating backdrop.
The firm highlighted that single-family core organic pressures in the quarter were larger than anticipated. Gross margin fell below 30% for the first time since 2021; the latest twelve months show a gross profit margin of 30.39%. DA Davidson described Builders FirstSource’s outlook for the first quarter of 2026 as disappointing.
Seasonal dynamics and weather-related disruptions were cited as factors weighing on the initial quarter of 2026. DA Davidson noted that the weak start to the year increases the burden on subsequent quarters if the company is to hit the midpoint of its full-year guidance.
Data reviewed by the firm indicate that 16 analysts have reduced earnings estimates for Builders FirstSource for the upcoming period, reflecting broader concern about near-term revenue and margin drivers. DA Davidson also expressed caution on valuation given a weak new residential construction environment; the firm’s $111 target corresponds to roughly 9.5 times estimated 2027 EBITDA.
Market-level metrics referenced in the review indicate shares are trading at $107.64 and the company carries a trailing P/E ratio of 27.45, a set of figures that the firm and accompanying analysis interpreted as implying the stock is slightly overvalued at present.
The company’s reported fourth-quarter 2025 results missed analyst expectations on both the bottom and top lines. Builders FirstSource posted fourth-quarter earnings per share of $1.12 versus a projection of $1.27, an 11.81% negative surprise. Revenue for the period came in at $3.4 billion against an expected $3.46 billion, a shortfall of 1.73%.
Management and analysts pointed to affordability pressures, muted consumer confidence and lower commodity prices as contributors to softer sales in the quarter. In response to the weaker-than-expected results, Benchmark reduced its price target for Builders FirstSource from $142 to $138 while maintaining a Buy rating.
DA Davidson’s reaffirmation of Neutral and its valuation-based caution reflect an assessment that the company faces a challenging near-term demand environment in new residential construction and that quarterly execution will need to improve to align results with market expectations.
Key points
- DA Davidson kept a Neutral rating on BLDR with a $111 price target, equivalent to about 9.5 times estimated 2027 EBITDA.
- Fourth-quarter 2025 showed weaker-than-expected single-family organic trends and a gross margin under 30%, while Q1 2026 guidance was called disappointing.
- Analyst revisions and sell-side adjustments are underway - 16 analysts have trimmed earnings estimates and Benchmark lowered its target to $138 but stayed Buy.
Risks and uncertainties
- Ongoing weakness in new residential construction could pressure Builders FirstSource’s revenue and margins - this affects the housing and building materials sectors.
- Seasonal and weather-related impacts on early-2026 activity create uncertainty about the company’s ability to meet full-year guidance - this poses risks to short-term industrial and construction supply chains.
- Valuation concerns given current multiples and near-term earnings downgrades introduce market risk for equity investors in BLDR.