RBC Capital downgrades Builders FirstSource to Sector Perform, sets price target to $62

U.S. housing starts fell 9% in September to 1.221M units, missing estimates of 1.305M, according to Truist. Multi-family starts dropped 28% year-over-year, while single-family starts rose 2%. Permits and completions also declined. The data impacts building products and homebuilder stocks.

Oppenheimer lowered its 2026 EBITDA forecast for Builders FirstSource to $1.05 billion, citing weaker single-family housing starts and margin pressures. The firm expects Q4 margins to be challenged due to lower volumes and pricing squeezes from large homebuilders like Lennar and KB Home, which have negotiated lower material costs. Higher fuel and freight costs further strain margins, making the stock's valuation sensitive to demand changes.

Builders FirstSource shares fell after RBC downgraded the company to Sector Perform from Outperform and lowered its price target to $62 from $88. The stock has declined 5.23% in the past day and 47.89% year-to-date.

RBC downgraded Mohawk Industries (MHK), Builders FirstSource (BLDR), and Owens Corning (OC) due to expected headwinds in 2027. The firm lowered price targets and earnings estimates, citing higher rates, inflation, and weak housing starts. RBC prefers distributors over manufacturers and sees potential risks in the fourth quarter and 2027 for these stocks.

RBC Capital downgraded Builders FirstSource (BLDR) to Sector Perform, lowering its price target to $62 from $88. The stock is near its 52-week low, down 56% over the past year. RBC cited volume weakness and reduced EBITDA estimates. Other analysts have mixed views, with some noting potential benefits from residential market opportunities.

Vanguard S&P 500 ETF (VOO) will add Bloom Energy (BE), Illumina (ILMN), and another company, while removing Molson Coors (TAP), The Trade Desk (TTD), and Builders FirstSource (BLDR). BE's product revenue surged 215% due to AI demand, and ILMN raised EPS guidance. The changes have minimal impact on VOO's returns, as the fund is heavily concentrated in megacap stocks.