USG Corporation (NYSE:USG) — Shares of USG stock rallied 1.7% on Friday and appear to be on the verge of a breakout that could take them nearly 25% higher.
The company is a building materials manufacturer and the largest maker of gypsum wallboard in North America. S&P Capital IQ Equity Research rates USG stock a “Strong Buy” and raised its 12-month price target by $5 to $32 in late April, citing USG Corporation’s “rapidly expanding profit margins and balance sheet improvements.”
Its analysts also increased their earnings per share (EPS) estimates by 20 cents to $1.75 for 2016 and by 5 cents to $2 for 2017. Sales are projected to increase 5% this year to $3.97 billion thanks to higher prices and volumes and the recovery in demand for wallboard. The company is scheduled to report earnings for the second quarter in late July.
Turning to the chart, we see that USG hit a low of $15.86 in late January. This was followed by a vigorous three-month run, which terminated in April around $29.50. Since then, USG stock has consolidated its gains within a range of $26 to $29.50. A golden cross was triggered in May, and last week, shares closed above the 50-day moving average at $27.54, making it the immediate support line.
A break above the resistance line at $29.50 would be a triple-top breakout with a target of $35, which is almost 24% above Friday’s close. Thus, buyers may chance buying USG stock at the market price in anticipation of a breakout, or buy it on a close above $29.50, which would still result in a profit of almost 19% if the target is met.
Long-term investors should also consider purchasing USG stock for its strong fundamental growth, accepting the highly volatile nature of the building industry.