With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

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Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are building materials, forest products, metals, and packaging.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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Industrials came out on top this year, with 22 companies featured on the list.

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This year’s Fortune 500 marks the 68th running of the list.

This year’s group delivered stellar revenue and profit growth, but it underperformed the broader stock market.

This year’s Fortune 500 marks the 67th running of the list.

Formed in 1998, Builders FirstSource is the largest supplier of structural building products, value-added components, and services in the U.S.

This year's Fortune 500 marks the 66th running of the list.

Net sales at Builders First Source, a Dallas-based supplier of construction materials, fell 5.8% in 2019, but profits were up 8.1%; both metrics reflected the impact of falling commodity prices.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

Everybody loves an up-and-comer: 2018's top three-year performers in revenues, profits, and stock returns.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

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Builders FirstSource is a manufacturer and supplier of building materials, manufactured components, and construction services to homebuilders, contractors, remodelers, and U.S. consumers. Its manufactured products include wood floors, wall panels, stairs, windows, doors, mouldings, wood siding, roofing, insulation, cabinets, and much more. The company also offers software products for drafting, estimating, quoting, and designing home services for retailers, distributors, manufacturers, and homebuilders. Founded in 1998, the company was originally named BSL Holdings, but changed its name in 1999.

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Builders FirstSource (BLDR): Company Profile, Stock Price, News, Rankings

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Builders FirstSource

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Good day, and welcome to the Builders FirstSource Third Quarter 2026 earnings conference call. Today's call is scheduled to last about one hour, including remarks by management and the Q&A session. In order to ask a question, please press the star key followed by the number one on your phone at any time during the call. I would now like to turn the call over to Heather Kos, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead, ma'am.

Good morning, and welcome to our third quarter 2026 earnings call. With me on the call are Peter Jackson, our CEO, and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. The results discussed today include GAAP and non-GAAP results adjusted for certain items.

We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable, and a discussion of why we believe these could be useful to investors in our earnings press release, SEC filings, and presentation.

Our remarks in the press release, presentation, and on this call contain forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the Forward-Looking Statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll turn the call over to Peter.

Thank you, Heather, and good morning, everyone. Our third quarter results reflect the disciplined execution by our team and the resilience of our platform. While housing market conditions remain challenging, we are focused on what we can control, delivering solutions that help builders operate more efficiently and investing in value-added products and technology to drive productivity and fuel growth.

These efforts are reinforcing our leadership position and our role as the partner of choice for home builders. This environment underscores the importance of the operational excellence and differentiating capabilities at scale, which position us to outperform in any market. Let's turn now to slide four. We delivered third quarter results in line with our expectations for sales and EBITDA, even as single-family activity remained soft. Our value-added offerings, cost actions, and ongoing productivity efforts helped cushion the impact of lower volumes.

I want to thank our team members for their relentless focus on our customers as we head into the final quarter of the year. Before turning to our strategic priorities, let me spend a moment on the market backdrop. Mortgage rates moved back above 7% during the quarter, and with consumer confidence still weak, affordability remains the main constraint on new home demand.

Higher diesel and transportation costs are also adding pressure across the supply chain. Despite these headwinds, we are maintaining the midpoints of our full-year net sales and adjusted EBITDA outlook. Single-family starts are tracking with the assumptions we set last quarter, and economic forecasts have moved closer to our view since then. Pete Beckmann will walk through the details in his remarks. Demand this fall has been weak, and some builders will likely need to slow starts further to bring inventory in line with sales.

Our outlook already reflects this cautious view. In a market like this, builders lean harder on partners who can help them control costs and build efficiently, which plays to our strengths. We expect to capture share by delivering outstanding customer service, bundling our broad product portfolio to help builders with affordability, and applying technology in ways that make our sales teams more effective.

Performance varied by region, with continued softness across Texas and Colorado, partially offset by relative strength in California, Florida, and the Northeast. In multifamily, sales were up modestly in the quarter, but developers remain cautious about new starts as the industry works through existing projects and occupancy stays below desired levels in many markets. Based on the current pipeline, we expect multifamily results to stay muted in the near term. Our priorities have not changed.

We will continue to constrain structural costs and grow faster than the market. Even in a weak year, builders are still starting a meaningful number of homes. The growing shortage of skilled trades is driving builders toward off-site and installed solutions, where our offerings and our scale position us as the partner of choice.

Slide five highlights how we're managing through the downturn while protecting our ability to invest for the long term. We remain on track to deliver the $140 million in cost actions we outlined. As a reminder, $25 million of those savings will hit next year. So far this year, we have streamlined our organization, reduced overhead across the field support center and operations, and focused our investments in the initiatives with the clearest near-term value.

We have consolidated 45 facilities so far this year and 100 over the past three years while keeping our on-time and in-full delivery rate above 90%. With our scale and experienced team, we are well-positioned to manage through today's market and to benefit from meaningful operating leverage as it recovers. Slide six lays out the key initiatives underway across our four strategic pillars. This quarter, we gained share in a challenging market.

We also generated $23 million in productivity savings through targeted supply chain initiatives and manufacturing efficiencies and made steady progress on our ERP implementation. Turning to slide seven, we deployed approximately $161 million in the third quarter towards return-enhancing opportunities that are aligned with our capital allocation priorities. Strong free cash flow generation through the cycle gives us the flexibility to invest in the business, pursue acquisitions, and return capital to shareholders over time.

M&A remains an important lever. As shown on slide eight, we focus on acquisitions that expand our value-added product offerings and strengthen our position in desirable geographies. This quarter, we acquired ICG and Gleckler and Sons, which enhance our ability to serve customers in the Southeast.

Since the BMC merger in 2021, we have completed 44 acquisitions, representing approximately $2.5 billion in annual sales, the equivalent of a top six LBM player. The industry is still fragmented, and we see a long runway for M&A to contribute to our growth. Moving to slide nine, we see technology as an enabler of our self-help efforts, both in how we run our business and in how we serve our customers. Our goal is to help build a home building ecosystem where data flows efficiently from one step to the next.

When information moves cleanly between builders, trades, and suppliers, everyone works more efficiently, including us. Our investments are pulling pieces of that ecosystem together. In the third quarter, we led the Series A financing for Digs, whose AI platform brings a builder's construction documents into a single source of truth that follows the home from pre-construction through warranty.

We also invested in Scaffold alongside several of the nation's largest home builders. Scaffold's AI connects trade contractors to the home builder systems they already use and keeps schedules and purchase orders current across all of them. We're also using technology to help make our own systems and teams more productive. We have piloted a new sales app with will call functionality, which has reduced the time it takes customers to place an order by up to 90%. That means faster service for our customers and more capacity for our teams.

It's one example of how technology supports the productivity savings we expect going forward. We'll share more at Investor Day about how technology is benefiting our business and our vision for the home building ecosystem. One of my favorite parts of these calls is recognizing a member of our team. Today, I want to recognize Kay Moberg, a pricing analyst at our Wasilla, Alaska location.

In 1986, Ferris Bueller made skipping school look like an art form. That same year, Kay joined Spenard Builders Supply, one of our legacy companies, as a receptionist, and unlike Ferris, she has been showing up ever since. Her area manager calls her a beam of bright light, and she's always ready to jump in wherever she's needed. When she's not at work, you'll likely find Kay somewhere in the Alaskan wilderness hiking, cycling, hunting, or fishing.

Her teammates benefit from that too, because at inventory time, she brings in summer sausage and smoked salmon. I'm told nobody calls in sick on inventory day in Wasilla. Thank you, Kay, for 40 years of keeping our Alaska team well-supplied in more ways than one. I'll now turn the call over to Pete Beckmann to discuss our financial results in greater detail.

Thank you, Peter, and good morning, everyone. Our third quarter results met our expectations, reflecting solid execution and continued focus on cost management. Our cash flow generation and liquidity give us the capacity to pursue growth opportunities while maintaining financial flexibility. Turning to slides 10 through 12, net sales decreased approximately 2% to $3.9 billion, as lower core organic sales were partially offset by growth from acquisition.

Core organic sales declined 6% in single family, increased 2% in multifamily, and were roughly flat in repair and remodel. Even in a softer single-family backdrop, we gained roughly 1-2 points of share in the quarter. As a reminder, our single-family sales don't move one for one with starts. First, there is a roughly three-month lag between a start and our first sale.

Second, the value of a comparable start has declined by about 10% on average since 2019 as homes have become smaller and more value engineered. Third, affordability pressure has extended into pricing across the supply chain, lowering average selling prices per start. Gross profit was $1.1 billion, down 11%. Gross margin was 27.8%, down 260 basis points, primarily due to the lower housing starts environment and related headwinds.

Adjusted SG&A was $785 million, down $5 million. Lower variable compensation, reduced headcount, and the benefit of our cost actions more than offset acquired operations and higher insurance, fuel, and delivery expenses. We remain on track to deliver $115 million of cost actions in 2026 or $140 million on a full run rate basis, including the additional savings identified last quarter. These actions are separate from productivity savings.

They include additional facility consolidations, adjustments to incentive compensation, tighter control of discretionary spending, and the lower merit and overhead spend. Adjusted EBITDA was $311 million, down 28%. Adjusted EBITDA margin was 8.1%, down 290 basis points, primarily due to lower gross profit and reduced operating leverage on the sales decline.

Before I walk through our adjusted EPS, beginning this quarter, we have updated our definition to improve the alignment of adjusted net income and adjusted EPS to be consistent with adjusted EBITDA. Both measures now exclude the same items, such as stock compensation expense and other management-identified adjustments, which includes items like severance. Prior periods have been recast on the same basis, and a reconciliation is in our release and presentation. Adjusted EPS was $1.51, down 25%, driven by lower adjusted net income, partially offset by share repurchases.

Now let's turn to the cash flow balance sheet and liquidity on slide 13. Our third quarter operating cash flow was $147 million, compared to $548 million in the prior year, reflecting lower net income and the lapping effect of last year's working capital release. Free cash flow was $76 million. On a trailing 12-month basis, our free cash flow yield was approximately 4%.

Our net debt to adjusted EBITDA ratio was approximately 4.1x, in line with our expectations. That is above our long-term target, but we are comfortable with our position, supported by approximately $1.5 billion in liquidity, consistent free cash flow, and favorable terms. We expect leverage to return to our target range as EBITDA improves. In the third quarter, we invested $71 million in capital expenditures and $91 million in acquisitions. We did not repurchase shares in the quarter.

Slides 14 and 15 outline our updated 2026 outlook and assumptions. Within our geographies, we continue to expect single-family starts to be down nearly 7%, multi-family starts down about 4%, and repair and remodel activity down 1%. We have narrowed our ranges and maintained the midpoints for net sales and adjusted EBITDA.

We expect net sales of $14.2 billion to $14.6 billion, adjusted EBITDA of $1.075 billion to $1.125 billion, and adjusted EBITDA margin of 7.4% to 7.9%. Our gross margin outlook remains 27.5% to 28.5%. We expect free cash flow of approximately $400 million to $450 million, narrowing the band within our previously stated range. Our guidance assumes average commodity prices in the range of $390 to $410 per thousand board foot, around the long-term average of $400. Lumber prices have eased slightly, as we expected, while OSB prices have risen in recent weeks following mill curtailment announcements.

Moving to slide 16, as 2027 comes into focus, we have again laid out scenarios showing how we expect to perform across a range of housing and commodity conditions. These scenarios are not guidance. I repeat, these scenarios are not guidance. They do not include cost actions beyond those already announced.

They are meant to frame potential outcomes in different environments. In closing, we are managing costs and cash closely in the near term, while continuing to invest where we see the best long-term returns. Our liquidity and cash generation give us the capacity to do both. We look forward to sharing more about our financial framework and long-term targets at Investor Day next month. With that, I will turn the call back over to Peter for some final thoughts.

Thanks, Pete. We are the nation's largest supplier of building materials and value-added services to home builders. We hold leading positions in manufactured components and in windows, doors, and millwork, pairing national scale with strong local relationships in the markets we serve. Technology is a growing part of how we put that scale to work for our teams and our customers.

Our team has managed through cycles before, and we are using this one to strengthen the company. The work we are doing today will make BFS a more efficient, faster-growing business with meaningful earnings upside, built to compete and win in any environment. We will show you how at our Investor Day on November 17th at the New York Stock Exchange. Our leadership team will walk through the many ways we plan to drive shareholder value, and we will share the long-term targets behind that plan. We hope to see many of you there. Thank you again for joining us today. Operator, please open the line for questions.

Thank you. If you would like to ask a question, please press one on your telephone keypad. To leave the queue at any time, please press star two. Once again, that is star one to ask a question. In the interest of time, we do ask that you please limit yourself to one question. We will pause for just a moment to allow everyone a chance to queue. Our first question will come from Matthew Bouley with Barclays. Your line is open.

Wanted to ask a question around the 2027 margin outlook and cost reductions. I think if I am looking at the midpoint margins, sort of in the low 6s, and correct me if I am wrong, I know this year you talked about $140 million of cost actions that are beyond productivity. In a scenario of the lower ends of the range, you point out kind of low 800s or high 700s on single-family starts. How do you see your ability to pull back further on SG&A sort of austerity measures in that environment? Do these scenarios include those type of cost reductions? Thank you.

Hey, Matt. Good morning. Yeah, it is a fair question, and I think as you have seen, we were able to react to the downturn in the market. Very experienced team. As much as we do not enjoy shrinking the business, it is a lot more fun to grow it. He knows how to do it.

We have executed against that, a whole variety of ways that we have made the business smaller to match the size of the market, whether it is location closures, variable costs, fixed overhead reductions. A lot of forms there, whether it be discretionary or the field support center, staffing reductions, all actions that we have taken. We will continue to execute on those based on what the market gives us. Yeah, those are opportunities into the future. That is not what we are doing here.

This is just our kind of high-level view based on what we are seeing and some of the key variables right now. We have not gone through our annual operating process, our planning process. That will happen here over the next month and a half and into the beginning of next year. We will roll that out to all of you so you know the details.

Got it. Okay. I appreciate that, Peter. Thank you. Secondly, I guess kind of a two-parter here on M&A. So high level, just how are you thinking about, or perhaps kind of explain M&A versus leverage here to the extent you can acquire EBITDA in a leverage-neutral fashion. So just kind of broader thoughts on that outlook.

Then secondly, I would love to hear a little more detail on Gleckler specifically. Our understanding was they were growing, they had a lot of impact perhaps on the Florida market. So just wanted to understand how you were competing with them now that you have acquired them. Any more details on their financials? Anything along those lines, would be great to hear. Thanks.

Sure. Yeah, so M&A continues to be an area of focus for us. When we look at the business, we continue to be confident in the balance sheet, the strength of what we have borrowed, the tenure of it, which we have borrowed, the interest rates at which we have borrowed. So we feel confident in what we have got established on the balance sheet.

These deals are relatively modest. They are in the range of our cash flows that we are seeing. For us, if you just look at it mathematically, it is ensuring you are on the right side of the interest coverage ratio. It is making sure you are on the right side of the valuation in terms of the multiples.

I think we can demonstrate, and while we would never get into details on these calls, we are able to acquire these assets at a discount from what we would have certainly a couple of years ago, but we think certainly against what we can do with them. I think that is a good dovetail into Gleckler. It is a great business. You are right.

We are excited to bring the Gleckler team on board. The BFS and Gleckler teams are working very closely together to figure out how to pull those two businesses together and put the best people in the right seats. That means for us, I think opportunities to optimize, whether it be locations, staffing, the way that we apply our resources to meet customer needs in a variety of different categories.

Expanding candidly in a couple of categories now that we have better capacity in certain product categories, both Gleckler and ICG working together with BFS to deliver on that. Pricing is always part of that as well, but I think that is a real opportunity for us. We are excited about putting those teams together. Takes what is already a strong business for us in Florida and makes it even stronger with a better product portfolio for our customers.

Well, got it. Thanks, Peter. Good luck and see you in a couple of weeks.

Thank you. Our next question comes from Mike Dahl with RBC Capital Markets. Your line is open.

Hi, this is Chris off from Mike. Thanks for taking our questions. Maybe just on gross margin, I was hoping you guys could flesh out your thinking around kind of sequential gross margin from 3Q-4Q, and as we exit the year, and given your range of outcomes for 2027, how should we think about the potential impacts on gross margins on the high end of that range, the low end of that range? That would be helpful. Thanks.

Well, I'll start at the high level, and Pete Beckmann can give you more detail. I'd say that if you look at the year and the way things have played out, pretty rough start to the year on gross margins. A lot of competition, really aggressive sort of through the first quarter and into Q2. Towards the end of Q2, though, things really started to level out.

And I would say since then, we've been in a fairly narrow band of margin performance. I think that's reflective of how aggressively everything went down. I think there was a bit of a digestion by some of the players who led it down in realizing how far they maybe should have gone versus went, and there's been some stabilization at that level. Now, that always comes into question, how stable it's going to be whenever you see significant movements on the starts number.

I think that's the only question mark that remains for us now is, what is this most recent move in mortgages going to produce from a starts perspective? You've heard our commentary around it. We think it's likely some builders will have to change their trajectory a little bit. Then how will the discipline hold up on the margin side for the folks who are serving that smaller market? And we've got some optimism based on what we've seen. We don't think there's a big move from here, but that's the remaining question in my mind. Keith Hughes?

Yeah. So more specifically with Q4, the imputed number is going to be down slightly from Q3 based on just the squeeze, which we anticipate with some of the pullback and the seasonality, some of the deleverage in the fixed cost structure and COGS, but also what we're seeing and hearing from our customers and some of their moderating to balance inventory and sales.

Now that laps into 2027. As you think about it, we did not give guide, but the way to think about it is we certainly started the year a little bit higher and it has come down, so we have to digest that lapping effect as we go into 2027. Just that as a framework is a way to think about what transpires or transposes over into the 2027 scenario modeling.

Understood. I appreciate that. And I guess just more broadly on competitive dynamics, and given the more recent change in the demand backdrop, how are you guys thinking about those dynamics through year-end and into next year? Then particularly on the commodity side, realizing that always tends to be a tougher part of the market, but just what are you seeing there specifically?

Well, I will reiterate that I think things have stabilized by and large on the competitive side. We will continue to monitor it and react appropriately. I do not see anything dramatic playing out there, but like I said, movements in starts have a tendency to cause reactions, so we will keep a close eye. When it comes to commodity side, I think what you have seen is pretty disciplined behavior out of particularly the lumber mills, maybe a little less so on the OSB side, but that has been moving recently as well. You may have seen one of the announcements that came out last night, cutting another mill. That all is supportive.

I think it is supportive of pricing remaining in an area where we can be profitable and, more importantly, where the mills can be profitable, and where we can make a higher number and not see it as a headwind on top of what we have been facing. I think the broad statement is there is no meaningful movement up in our mind until the markets start to move a little bit more aggressively to the north, to up and to the right. But at least the bottom it seems to be found and the industry is taking the appropriate actions to respond to the real demand on the ground.

Thank you. Once again, that is all one of you would like to ask a question. Our next question comes from Charles Perron-Piché with Goldman Sachs. Your line is open.

Thank you. Good morning, everyone. First, I would like to ask a little bit more about the comments that you've made about your ability to gain share in this environment. It is quite encouraging, especially while you are able to sustain a gross margin within the targeted range that you talked before. I guess against that, I was wondering if you could discuss your approach to share gains versus protecting margin going forward. As you focus on service and leveraging your scales and offering, is there a possibility for you to grow share without necessarily having to compete aggressively on price?

Yeah. Great question. Thank you. The short answer is yes, and the way that we are going to execute on that, we will drill you into more of the details when we are together for Investor Day. But the gist of it is our approach to share gains is very focused around individual actions at the market level. So targeting areas of the business where we know we have a right to win.

We win elsewhere. We have a very good product offering. Maybe we have got an opportunity to take advantage of available capacity, and focusing our sales efforts, whether it be putting the team aligned around a specific initiative, marketing materials, presenting the case to a national-level representative from a home builder. Any number of different approaches, but very much focused at a market level to be able to capture that incremental growth opportunity.

One way that we do that is by taking these opportunities and reaching out to suppliers and putting together a joint approach to attack a particular market or a particular customer. Those are oftentimes bundled. They are grouped together. It does absolutely rely on what you described, our customer service offering, whether it be on time and in full or the subject matter expertise that we can bring to bear.

All of that is where we have focused. We have a very disciplined approach to pursuing that opportunity, and I think it is really yielding results, and we are seeing it in this quarter, and we think we have a real opportunity to continue to deliver on that into the future based on the momentum that we have built this year. Started with a great team. We are just giving them more tools to be able to win.

Thank you, Peter, for that. That is very good color.

And a second question, I guess not all starts are created equal. We know with some builders increasingly shifting their business to build to order. You also hear a little bit more luxury holding relatively better. Can you talk about your ability to service these end market opportunities? And what do those mean from a profitability standpoint, given your differentiated offering across your portfolio?

Yeah. So it's good, I think, on balance. The primary benefit from BTO is visibility. We have an opportunity to serve a wide variety of product categories. As a distributor, we're certainly very focused on managing that and delivering it both at a very high on time and in full, but also at the lowest cost possible, right?

Visibility around build to order is usually pretty good, so our opportunity to both capture a bigger percentage of the value of that start, as well as ensure that we're efficiently providing it to the job site are certainly advantages that we bring to bear. But all in all, I guess I would describe it as normal business. We certainly do it every day in a wide variety of markets, so it's not a dramatic shift for us, candidly. It's a very modest one, but that's the one advantage I can think of when we think about it.

All right. Thank you for the color, guys, and good luck with the quarter.

Thank you. We'll move next to Rafe Jadrosich with Bank of America. Your line is open.

Hi. Good morning. Thanks for taking my questions.

Can you talk about the diesel and inbound/outbound freight impact to the third quarter, and then how you're thinking about it for the fourth quarter?

I don't think we break out the quarters. As a frame of reference, it is a meaningful number for us, right? We run a top 20, top 30 fleet in the country, so you can imagine diesel is an important number. Based on sort of the peak numbers, we're looking at it $40 million-$45 million a year on the cost of diesel outbound directionally. Now we're offsetting that in a number of ways, obviously, including it in pricing. We've announced a delivery surcharge to try and offset some of that. It's meaningful and it's something that we paid a lot of attention to.

We're focusing on it operationally, doing what we can to make sure our trucks have simple things, like the appropriate amount of air in the tires to ensure that we're getting the best fuel mileage, but also making sure we pass it through where there's no way to offset it ourselves. That's an ongoing battle. It ebbs and flows, as you might imagine, based on the daily price. I'm looking at Pete, I don't think we have anything for the third and fourth quarter breakdown, do we?

Not that we've prepared to share with the group, but you hit it on the head. We have fuel costs that are double what they were a year ago, and we're working through that in SG&A. Our fuel surcharge is up 30% from a year-over-year in what we're able to pass through. So we are making progress on it. It's not all the way where we want it, and the inbound is, as we've talked about in the past, an inflationary cost that it passes through naturally.

Okay. That is helpful. Then, you sort of commented on the market share trend improving more recently or through the year. Are there specific categories within your different segments where you are seeing market share gain and more traction versus others?

It is pretty mixed. What we have, I would say, acknowledged, and you can see a little bit in the trajectory of the product categories. We have picked up a little bit more of the lumber just by virtue of already having a lot of the value add. Now, that said, bundling certainly has helped value add, so there is a bit of a synergistic benefit, I guess, where we capture on both sides. But I think just looking at the numbers, you can see that lumber is an area that we have, I would say, picked up more on a percentage basis.

Thank you. We will move on to Ryan Merkel with William Blair. Your line is open.

Hey, everyone. Thanks for the questions. Wanted to start with a trends question. Peter, I'm curious to hear how the market has evolved since July, and it sounds like demand hasn't taken a step lower here in 4Q despite the higher rates. Is that right?

No. I got to be real careful how we thread the needle on this one, right? The momentum for us hasn't shifted yet in response to the mortgage rates. But I don't want to misstate. We're waiting to see what happens in that demand shift. There's an expectation that it will move. We've been insulated from it a little bit in two ways.

One, it takes a little bit of time for the acknowledgement of the mortgage rates, the sales pace to change, the starts to be sort of changed at the builder level, and then that to show up in our number, right? There's a couple-month gap from the start until we start delivering things to the job site. Prep the site, the foundation, the slab, whatever, the rough, before they start delivering lumber trusses and framing. So that gap is kind of where we are right now.

The commentary from builders is pretty sobering. That move in mortgages was a bit of a shock to the system, and I think that the builders acknowledge that, and we're recognizing that there's going to be something coming that has a lot to do with what we put out there for the 2027 directionality. But these things have a tendency to move quickly and in any direction you might choose to model.

So there's a wait-and-see kind of component here. So far, good shape. I think our share growth has helped us. Not teeing up a dramatic fall off because I think we've got enough of a window to flow through with what we have, but certainly expecting something is going to come through here.

Yep. That all makes sense. Okay. I'll take a shot at the 2027 framework. I guess my question is on gross margin. What are the puts and takes? I realize that the framework doesn't include more cost out, so that's an important consideration that I know you got the Investor Day coming up, but anything you can tell us on gross margin would be helpful.

Yeah. Just to reiterate, this isn't guidance. It's scenario modeling using single-family starts and commodities. I talked about a little earlier the lapping effect that we'll have in gross margins that has to be contemplated into the modeling work on the potential outcome.

And what Peter Jackson just talked about with some of the pacing due to the affordability that will likely play forward into at least the first part of the year, if not the full year, given future relief on that affordability front. I think it's going to potentially be a challenging environment again, and we're prepared to match it with our ability to manage through any environment.

All right. Got it. Best of luck, guys. Thanks.

Thank you. We'll move on to John Lovallo with UBS. Your line is open.

Hey, good morning, guys. This is Matt Johnson on for John Lovallo. Appreciate the time here. I guess first off, just on the scenarios, just one more question. On the middle scenario you guys have, I think it is calling for single family starts to be down about 5% and your sales to be down about 3% within that at the midpoint. Is there just any kind of color you guys can give us on how much completed M&A is in that number and kind of what else might be driving that delta? I guess really was trying to get a handle on what you are assuming for your single-family organic sales performance relative to single-family starts.

Yeah. There is some level of acquisitions that are lapping from the 2026 timeframe, but no new acquisitions that we have built into it. So I think that is the way to think about that impact from M&A.

Okay. Appreciate that. Then I guess just back on M&A. I think someone asked about it earlier, but you guys completed the Gleckler and ICG deals this quarter, which was encouraging. I guess based on your results and also I think US LBM's filings, it seems like leverage is becoming a bit more of a challenge just as EBITDA is getting compressed across the industry. I guess, are you guys seeing any less competition for M&A out in the market today? And how would you frame your appetite for M&A with leverage where it is at? And are you seeing more targets come to market just given the state of things out there right now?

Broadly speaking, we still believe that M&A is going to be a long-term path for us to continue to grow. We capture tremendous synergies. We love being able to bring new talent, new regions, markets, products into the BFS portfolio. I will start by saying that hasn't changed, and we don't think that that will change.

The ups and downs of the M&A sort of transaction space, that is absolutely true. I would say in the scheme of things, this is probably a down market in terms of folks being willing to sell. I think if folks are serious about selling, as you can tell, transactions are going through. I think multiples are more modest than they have been. Not surprisingly, I guess, in a lot of ways, based on our stock price and the dynamic broadly.

That is part of the reason why there aren't as many deals on the market. That said, I do think this is an environment that lends itself to success with mergers. I do think folks that are selling are doing it strategically. They're looking out for their teams. They're ensuring that their businesses are going to be strong into the future.

Builders FirstSource (BLDR) Q3 2026 Earnings Call Transcript

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