12:46 PM EDT, 10/25/2024 (MT Newswires) -- Builders FirstSource ( BLDR ) is likely to expand its earnings faster than expected, driving potential upside to its share price, UBS Securities said Friday in a note initiating coverage of the company.

The firm said it was forecasting a roughly 13% adjusted earnings per share compound annual growth rate through 2026, well above the consensus of 8%.

UBS said that the market appeared "overly cautious" about the company's growth potential over the next few years given the ongoing softness in the multi-family market, the drop in the amount of building materials used for each new housing project, and doubts about the direction of the housing construction cycle.

However, the firm said it believed current headwinds will subside next year, letting investors refocus on the company's increasing market share opportunity and earnings potential over the next few years.

UBS said it expects a slowdown in the number of multi-family starts in 2025, adding that lower mortgage rates could reduce some of the affordability challenges and help maintain the amount of building materials used per new housing start.

The firm initiated coverage at buy with a 12-month price target of $232.

Price: 181.43, Change: -0.23, Percent Change: -0.13