BFS' Underwhelming 4Q Numbers Pile Onto Others' Forecasts of Troubling Times Ahead

Builders FirstSource's 2026 outlook, presented to analysts with its 2025 4Q and full-year financial report

By Craig Webb

Builders FirstSource's report that its fourth-quarter net income plummeted 83% from the year-earlier period adds to a series of recent economic reports that all point to hard times ahead for dealers.

Analysts had expected the dealer to reveal $336 million worth of adjusted EBITDA in the final three months of 2025. Instead, the nation's biggest full-service lumberyard reported $274.9 million, 44.3% below 4Q24. The analysts expected $3.45 billion worth of sales in the quarter. Instead, BFS said it generated $3.36 billion.

For all 2025, net income was 60% lower at $435.2 million as net sales decreased 7.4% to $15.2 billion. Full-year adjusted EBITDA dropped 32% to $1.6 billion. 

BFS predicts net sales in 2026 will range between $14.8 billion and $15.8 billion, while adjusted EBITDA will be between $1.3 billion and $1.7 billion--not much above or below 2025's performance. BFS projects single- and multi-family starts in its markets to be flat, while repair and remodeling will grow just 1% and acquisitions will add 1%.

The dealer's Feb. 17 announcement came just hours before the National Association of Home Builders' chief economist, speaking at the International Builders' Show in Orlando, FL, echoed BFS' talk about weak housing conditions. Robert Dietz forecast single-family starts will increase 1.0% in 2026 to 940,000 units, while multi-family starts will drop 5% to 392,000. Both sectors should be 5% to 6% better in 2027, NAHB said. Residential remodeling activity is expected to increase 3% in 2026 and an additional 2% next year in inflation-adjusted terms. 

Earlier this month, Matt Leiser of Cleveland Research Co. said conflicting trends are likely to make this a "flattish" year for hardware stores and home centers. Speaking to Orgill customers Feb. 5 at the distributor's 2026 Dealer Market. Leiser said tariff fears, home affordability challenges, and customer frugality all are generating headwinds for retail-oriented construction supply companies. Meanwhile, pro dealers were challenged by builders constructing smaller houses, using cheaper materials, and installing fewer windows and garages.

Cleveland Research's survey of Orgill dealers suggests those stores raised their prices 5% last year. Those same dealers said in the October survey that they figured on an additional 4% price increase this year, but Leiser thinks the actual rise will be closer to 1% to 2%. One reason why is that tariff increases won't be as much of a factor in 2026 as they were in 2025, Leiser said.

When you compare each calendar quarter in 2026 with what happened a year earlier, Cleveland Research predicts a steady decline in the average ticket price and a steady rise in the number of transactions. The net result is about a 0.5% increase this year in sales at small independent hardware stores, the company says.

The Home Depot and Lowe's both are forecast to rise about 1 percentage point. Those big boxes also have seen 3% to 4% higher tickets but fewer transactions, Leiser said, and they are pushing back by promoting "value, value, value."

At Builders First Source, core organic net sales declined 14% and commodities brought in 1.9%. Acquisitions added 3.8% to the revenue totals. Multi-Family sales declined 20.4% contributing to 2.4 points of the 14-point sales drop. Single-family sales fell 15.4% (accounting for 10.3 points of the overall decline), and Repair and Remodel declined 6.5% (pushing overall sales down 1.3 points).

For the entire year--where below-normal starts again were cited--core organic net sales declined 10.3% and commodities brought in 1.3%. On a dollar-basis multi-family sales declined 23.5%, single-family declined 9.0%, and R&R drooped 6.9%. In terms of impact on total sales, the single-family drop caused 6.1 points of the 10.3 overall decline, multifamily cut it by 2.8 points, and R&R figured in 1.4 points of the overall decline. That's 11.3 points of decline, softened by a 1-point gain from acquisitions.

Gross margin percentages were 29.8% for the quarter (250 bp down from a year before) and 30.4% for the year (down 240 bp).