By Paul R. La Monica
QXO, the building supplies company led by serial entrepreneur Brad Jacobs, is looking to consolidate the highly fragmented industry through a series of roll-up acquisitions. But following the announcement of its third deal in a year, QXO's stock suddenly finds itself on a shaky foundation.
Shares of QXO have tumbled nearly 15% this week. The stock's drop comes on the heels of last Sunday's news that the company was planning to buy insulation distributor and installer TopBuild for $17 billion. TopBuild's stock, on the other hand, is up 11% this week. Its stock has pulled back about 7% from the postmerger high on Monday though.
QXO has already purchased roofing supply company Beacon for $11 billion last April and then bought lumber distributor Kodiak Building Partners earlier this year for $2.25 billion. (QXO also made an offer last year for drywall distributor GMS but was outbid by Home Depot subsidiary SRS.)
So are investors worried that QXO is biting off more than it can chew, doing too many deals in a short period? Wall Street doesn't seem worried.
The reaction shouldn't be a huge surprise. Shares of companies doing deals often fall after announcing a deal, especially when stock is used to help finance the purchase. There are multiple worries for investors in the acquirer. For one, issuing more stock for an acquisition can dilute the value for existing shareholders. There are also worries about merger integration risks.
As such, investors specializing in merger arbitrage often short sell the shares of an acquirer and buy the stock of a merger target company to lock in gains from the deal on both sides.
Analysts also remain bullish on the stock. All 15 who follow QXO have the stock rated a Buy and the consensus price target of $32.50 is 50% above its current price.
It is also worth noting that this isn't the first roll-up rodeo for Jacobs. He used a similar acquisition strategy to turn United Rentals and GXO into leaders in the equipment rentals and logistics industries. In fact, the expectation that QXO would do more deals was a key reason why Barron's made QXO a stock pick in a feature last fall.
But Wall Street seems to be taking these concerns in stride. Benchmark analyst Reuben Gardner noted in a report after the TopBuild deal was announced that QXO that the combined company will be either the largest or second-largest in the U.S. in the insulation, roofing, waterproofing, and lumber markets.
Wolfe Research's Trevor Allinson added that the TopBuild deal will move QXO even closer to its goal of having $50 billion in annual revenue.
Allinson estimates that QXO will now be on track to generate sales of around $18 billion with TopBuild. And he added that the deal shows that even with competition from Home Depot and Lowe's, which has also been making acquisitions in the building supplies market, there are still plenty of opportunities for Jacobs and QXO to keep shopping.
"One key area of pushback we have received regarding our bullish stance on QXO has been centered around the company's ability to get deals across the finish line," Allinson wrote, adding that "the completion of the [TopBuild] deal in combination with the Kodiak acquisition that closed earlier this month largely eliminates that thesis."
So as long as QXO can continue to find other merger targets, the company should be able to remain on track to hit that $50 billion revenue goal.
Adam Baumgarten, an analyst with Vertical Research Partners, said in a report after the TopBuild deal that "there are plenty of additional large and bolt-on acquisition opportunities that QXO could pursue," including potential deals for commercial roofing and residential and industrial insulation suppliers.
But QXO investors will have to learn to stomach more short-term volatility along the way, especially if the company continues to issue stock to finance some of its acquisitions.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 24, 2026 13:56 ET (17:56 GMT)
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