ROCK's Backlog & Strategy Boost Growth Amid Market Challenges

Gibraltar Industries, Inc. ROCK is benefiting from a strong backlog, disciplined portfolio simplification, strategic acquisitions and a healthy balance sheet with solid cash flow generation. Additionally, robust project-based activity within the Agtech and Infrastructure segments contributed positively to the company’s performance.

Other industry players that share space with ROCK, including Armstrong World Industries, Inc. AWI, Owens Corning OC and Masco Corporation MAS, are benefiting from the strategic acquisitions, solid margin expansion and a strong liquidity position. Increased government funding and optimism about the rate cuts by the Fed are fostering the growth trend.

However, Gibraltar Industries' prospects are somewhat hindered by housing softness, tariffs, margin strain and funding risks, which are pulling back its growth prospects.

What Makes ROCK Stock Attractive?

Portfolio Simplification and Focus on Core Markets: On June 30, the company announced plans to simplify its portfolio by divesting the Renewables business and sharpening its focus on the Building Products and Structures markets, which cover the Residential, Agtech and Infrastructure segments. ROCK believes that a more focused portfolio backed by the right resources and capital allocation will enable stronger growth, margin expansion and improved cash flow performance, ultimately driving higher returns for shareholders.

The company is concentrating on the markets where it can build a leading position and actively participate across the broader value chain. In the first half of 2025, ROCK has invested $208 million in targeted M&A to strengthen its presence and scale core capabilities within these end markets, with further activity expected. Recent initiatives have already delivered 14% adjusted sales growth, driven by strong contributions from acquired metal roofing and structures businesses, increased market share in building accessories and continued momentum in infrastructure.

Robust Backlog Growth: The Agtech and Infrastructure segments delivered strong backlog performance, with total backlog increasing 43% year over year to $278 million. Agtech backlog surged 71% (33% organically), underscoring accelerating demand in Controlled Environment Agriculture (CEA) despite some delays in project starts. The acquisition of Lane Supply contributed meaningfully to this growth. Looking ahead, the Agtech business is expected to continue delivering growth and solid operating margins in 2025. The booking of additional projects — such as the Pomas developments — supports the confidence in building an even stronger backlog for 2026.

The Infrastructure segment also contributed to the overall performance, posting a 3% increase in backlog. This reflects continued demand and a healthy level of quoting activity. Overall, the growing backlog across these segments provides clear visibility into sustained revenue growth over the coming quarters.

Margin-Driving Initiatives: Gibraltar Industries continues to enhance its margin profile through a disciplined focus on strategic and operational excellence. The company is advancing its 80/20 productivity initiatives and progressing with enterprise-wide business system conversions, expected to be completed by 2026, positioning it for sustained long-term growth and scalability.

In the second quarter of 2025, Gibraltar Industries reported a solid adjusted operating margin of 14.5%, while the Infrastructure segment achieved a 300-basis-point margin expansion, supported by strong execution, effective supply chain management and a favorable product mix. Management reaffirmed its confidence in delivering adjusted operating margins of 14.6%-14.9% and adjusted EBITDA margins of 17.5%-17.7% for fiscal 2025, underscoring the company’s continued success in driving operational efficiency and profitability improvement.

Factors Hindering Growth

Margin Pressure From Mix Shifts: Gibraltar Industries faced some margin pressure due to shifts in its product and segment mix. The company’s consolidated gross margin declined to 28.4% in the second quarter of 2025 compared with 30.5% in the prior year, primarily due to product mix shifts and lower volumes in certain segments, particularly Agtech. Within the Residential segment, the operating margin decreased to 18.9% from 20.2%, reflecting softer mail product sales and integration-related costs. Management remains focused on improving the mix by leveraging operational efficiencies to sustain profitability in the coming quarters.

Softness in Residential Mail & Package: Gibraltar Industries experienced softer demand in its Residential Mail & Package segment, primarily due to lower new construction starts in 2024. Sales of centralized mail solutions declined by over 7% in the second quarter of 2025, reflecting ongoing weakness in multifamily housing activity. Although Gibraltar managed to limit losses versus the broader market, the segment’s end-market reliance creates structural vulnerability tied to housing cycles and affordability trends.

A Brief Review of Other Players

Armstrong: The company is benefiting from recent acquisitions and the successful integration of 3form and Zahner. Both of them have exceeded expectations by contributing significantly to Architectural Specialties and speeding up market penetration. During the first six months of 2025, the Architectural Specialties segment’s net sales grew year over year by 46.4% to $295.2 million, wherein these acquisitions contributed $69 million to the top-line growth. Armstrong World now anticipates net sales to be within $1.60-$1.63 billion (up from $1.57-$1.61 billion expected earlier), indicating an 11-13% increase from the year-ago figure.

Owens Corning: Owens Corning is benefiting from the Masonite acquisition (complementing the Doors segment) and higher selling prices. Besides, the efficient execution of the enterprise strategy, which involves modernizing production lines, improving capital efficiency and sustaining strong margins and consistent returns, bodes well for the company. Third-quarter 2025 revenues (from continuing operations) are expected to be slightly down to in-line year over year, approximately between $2.7 billion and $2.8 billion. Moreover, the company also expects to witness cost inflation in the quarter as well as in the near term, especially for labor and warehousing expenses.

Masco: The company is benefiting from the ongoing mitigating actions, including cost savings initiatives and ongoing changes to its sourcing footprint and pricing. Moreover, the diversity of products across its reportable brands, strong long-term prospects and a stable liquidity position are expected to boost profitability. Masco expects to generate 3-5% average annual sales growth organically, with acquisitions likely to contribute 1-3% yearly in sales. Average annual EPS growth is expected to be about 10%. The company continues to expect the long-term full-year operating profit margin target of nearly 18.5% in 2026.

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This article originally published on Zacks Investment Research (zacks.com).

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