By Paul R. La Monica

If Brad Jacobs builds it, the gains will come. That was the case with his previous companies, including United Rentals and XPO, and IT should remain the case for his latest, the building-products supplier QXO.

Jacobs, who has a net worth of $16.9 billion according to Bloomberg, isn't a household name, but maybe he should be. The 69-year-old founded United Waste Systems -- now part of Waste Management -- United Rentals, and logistics firm XPO. United Rentals, which Jacobs ran from 1997 to 2007, and XPO, where he was CEO from 2011 through 2022 and remains executive chairman, have continued to thrive. Shares of United Rentals are up more than 400% over the past five years, more than quadrupling the S&P 500's gain in the same time frame while XPO has surged nearly 340%. XPO also subsequently spun off warehousing firm GXO Logistics and trucking brokerage firm RXO as separate businesses.

Investors are now banking on QXO being the next big Jacobs success story. Going public as a blank-check company in June 2024, QXO recently completed an acquisition of Beacon Roofing Supply for $11 billion, giving it an actual business to run. And business appears to be going well: The company reported a second-quarter profit of 11 cents a share on sales of $1.91 billion, beating analyst forecasts for earnings of 4 cents a share on revenue of $1.87 billion. The stock has gained 30% so far this year.

Analysts expect QXO will continue to generate strong revenue and earnings from Beacon. William Blair analyst Ryan Merkel, who thinks $40 is a fair value for the stock, says QXO can post mid-single-digit organic growth even without M&A activity thanks to the U.S. housing shortage, the data-center buildout, and the need to replace aging infrastructure.

But a bet on QXO is also a wager on Jacobs doing more deals using a combination of the $2.3 billion in cash it has on its balance sheet and the expected cash flow it will generate from Beacon to make more acquisitions. CEO Jacobs notes that Beacon has annual sales of around $10 billion from nearly 600 branches, and a repair business that is rarely reliant on the whims of market forces. "When your roof is leaking, you fix it," he says. "Beacon was the right first step."

The expectation of more deals is priced into forecasts, with analysts predicting that sales will grow to more than $20 billion by 2028. Wolfe Research analyst Trevor Allinson notes that the building products industry "is ripe for disruption and tailor-made for Brad Jacobs."

He added that the "largely domestic supply chain provides stability in an increasingly uncertain economic environment" and that he expects more acquisitions during the next few years. Allinson has a $44 price target on QXO, more than double Monday's close.

Jacob's goals are even more ambitious. He says the goal is to eventually get to $50 billion in revenue within the next decade. That might seem extreme, but portfolio managers at Orbis Investment Management are optimistic, so much so that the company bought shares in QXO even before it acquired Beacon. Orbis invested in 2024, shortly after the company was formed via an investment by Jacobs in publicly held software and consulting firm SilverSun Technologies, which was renamed QXO. Orbis now owns a 14% stake in QXO.

Orbis had previously invested in XPO in 2012 and likes the potential for Jacobs to hit another home run with building supplies via QXO. "Fragmented competition should yield ample M&A opportunities, where QXO can create substantial value by improving the operations of acquired businesses," John Christy and Eric Marais of Orbis noted in a report from September 2024, adding that "disruption risk is low" and that "it would be hard to come up with a better fit for the Brad Jacobs playbook."

Dealmaking may not be as easy as expected. QXO has already walked away from a proposed deal to buy French electrical components maker Rexel after Rexel turned down a bid from QXO in the fall of 2024. QXO also seems unlikely to make a new offer for drywall distributor GMS after Home Depot subsidiary SRS agreed to buy GMS for $110 a share. QXO had offered $95.20 a share for GMS and Jacobs suggested that QXO isn't going to get in a bidding war with Home Depot.

"It is incredibly important to be disciplined on price," Jacobs told Barron's about the possibility of any future acquisitions. "We don't fall irrationally in love with any particular company and we are not at all tempted to overpay."

That discipline should pay off in the long run. Mike Dahl, an analyst with RBC Capital Markets who initiated coverage on QXO in July with an Outperform rating and $33 price target, says investors shouldn't worry about QXO having to walk away from the GMS deal because QXO has many more options. "There are a significant number of large private companies (both family and private equity-owned) and an even larger number of small to midsize private players that we believe could likely be acquired at discounts to public multiples," Dahl says.

QXO isn't cheap -- it trades at 39 times 2026 earnings estimates, nearly double that of the S&P 500 -- but the valuation doesn't take into account the possibility of future acquisitions. QXO trades at 1.6 times book value, a better metric given its strategy. Orbis's Christy and Marais argue that the stock should trade between two and five times. At the 3.5 times midpoint, QXO would fetch $46 a share, up nearly 125%.

With Jacobs just getting started, that seems like something investors can build on.

The Technical View

In early August, QXO successfully retested a cup with handle breakout that occurred on June 9, and is now constructing the right side of a potential double-bottom base, with a potential pivot point at $22.38. It looks likely to fill in the upside gap from the June 24 session, when the company announced the pricing of stock offering, by year end. Sell stops should be placed near $18.75. -- Doug Busch

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

August 20, 2025 00:01 ET (04:01 GMT)

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