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3 days ago
- Business
- Yahoo
Is Persimmon (PSMMY) Stock Outpacing Its Construction Peers This Year?
For those looking to find strong Construction stocks, it is prudent to search for companies in the group that are outperforming their peers. Persimmon Plc (PSMMY) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? By taking a look at the stock's year-to-date performance in comparison to its Construction peers, we might be able to answer that question. Persimmon Plc is a member of the Construction sector. This group includes 88 individual stocks and currently holds a Zacks Sector Rank of #12. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group. The Zacks Rank is a successful stock-picking model that emphasizes earnings estimates and estimate revisions. The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months. Persimmon Plc is currently sporting a Zacks Rank of #2 (Buy). Over the past three months, the Zacks Consensus Estimate for PSMMY's full-year earnings has moved 2.8% higher. This is a sign of improving analyst sentiment and a positive earnings outlook trend. According to our latest data, PSMMY has moved about 16.8% on a year-to-date basis. At the same time, Construction stocks have lost an average of 2.7%. This shows that Persimmon Plc is outperforming its peers so far this year. Another stock in the Construction sector, Construction Partners (ROAD), has outperformed the sector so far this year. The stock's year-to-date return is 22.3%. The consensus estimate for Construction Partners' current year EPS has increased 10.4% over the past three months. The stock currently has a Zacks Rank #2 (Buy). Looking more specifically, Persimmon Plc belongs to the Building Products - Home Builders industry, which includes 17 individual stocks and currently sits at #222 in the Zacks Industry Rank. On average, stocks in this group have lost 14.9% this year, meaning that PSMMY is performing better in terms of year-to-date returns. On the other hand, Construction Partners belongs to the Building Products - Miscellaneous industry. This 30-stock industry is currently ranked #91. The industry has moved -9% year to date. Persimmon Plc and Construction Partners could continue their solid performance, so investors interested in Construction stocks should continue to pay close attention to these stocks. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Persimmon Plc (PSMMY) : Free Stock Analysis Report Construction Partners, Inc. (ROAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
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4 days ago
- Business
- Yahoo
Are You Looking for a Top Momentum Pick? Why Construction Partners (ROAD) is a Great Choice
Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades. Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us. Below, we take a look at Construction Partners (ROAD), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score. It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Construction Partners currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period. You can see the current list of Zacks #1 Rank Stocks here >>> Let's discuss some of the components of the Momentum Style Score for ROAD that show why this road and highway construction company shows promise as a solid momentum pick. A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area. For ROAD, shares are up 2.1% over the past week while the Zacks Building Products - Miscellaneous industry is up 0.06% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 15.7% compares favorably with the industry's 2.55% performance as well. While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Over the past quarter, shares of Construction Partners have risen 49.11%, and are up 84.36% in the last year. In comparison, the S&P 500 has only moved 3.59% and 14.21%, respectively. Investors should also take note of ROAD's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, ROAD is averaging 501,201 shares for the last 20 days. The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with ROAD. Over the past two months, 3 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost ROAD's consensus estimate, increasing from $1.96 to $2.14 in the past 60 days. Looking at the next fiscal year, 2 estimates have moved upwards while there have been 1 downward revision in the same time period. Given these factors, it shouldn't be surprising that ROAD is a #2 (Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Construction Partners on your short list. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Construction Partners, Inc. (ROAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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4 days ago
- Business
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ROAD Stock Climbs 52% in 3 Months: Should You Buy the Surge or Wait?
Construction Partners, Inc. ROAD shares have soared 52.3% in the past three months, significantly outperforming the Zacks Building Products - Miscellaneous industry, the broader Construction sector and the S&P 500 index. The detailed share price performance can be studied from the chart below. Image Source: Zacks Investment Research The company's vertically integrated business model amid a favorable public infrastructure spending backdrop is driving its prospects in an uncertain macro environment. Moreover, its diverse offerings across products and services bring it closer to several growth opportunities through organic and inorganic moves. Another intriguing aspect of ROAD stock for investors is its bullish fiscal 2025 outlook, which the company raised in its recent earnings the past three months, ROAD stock has also outshone a few of its industry peers, including Armstrong World Industries, Inc. AWI, Installed Building Products, Inc. IBP and Advanced Drainage Systems, Inc. WMS. During the said time frame, the share price performance of Armstrong World has inched up 4.5%, while the same for Installed Building and Advanced Drainage has tumbled 4.4% and 0.2%, respectively. Vertically-Integrated Model: Construction Partners exercises a vertically integrated business model that notably offers it a competitive advantage over its peers and helps in leveraging market opportunities for its profitability. Through vertical integration, the company is able to optimize its supply chain and reduce volatility risks, while increasing supplier flexibility and enhancing its margins in the this strategic business model, ROAD aims to support its ROAD-Map 2027 goals. The targets include annual revenue growth in the range of 15-20% and EBITDA margin expansion in the range of 13-14%.Diversified Growth Opportunities: ROAD's diversified business offerings, including manufacturing and construction services, open doors for several growth opportunities in the market, organically or inorganically. Through organic growth, the company expands its services or facilities in the existing markets via upgrades and similar activities. Inorganically, it engages in acquiring new businesses that complement its existing business and expand its market reach. Furthermore, through greenfield expansion, the company enters new markets and upgrades its vertically-integrated business model by establishing manufacturing revolutionary Lone Star Acquisition, completed on Nov. 1, 2024, proved incremental to ROAD's business. This strategic acquisition of the Texas-based company has enhanced the company's value and expanded its geographic footprint through 10 HMA plants, four aggregate facilities and one liquid asphalt terminal, and accelerated achieving the ROAD-Map 2027 Fiscal 2025 Views: Backed by favorable market fundamentals, Construction Partners has raised its fiscal 2025 outlook, reflecting robust year-over-year growth and inducing investors' the full fiscal year, the company now expects revenues to be between $2.77 billion and $2.83 billion (up from the previous range of $2.66-$2.74 billion), indicating significant 52.2-55.5% year-over-year growth. Adjusted EBITDA is now forecasted between $410 million and $430 million (up from the previous range of $375-$400 million), reflecting year-over-year growth between 85.9% and 94.9%. Adjusted EBITDA margin is now expected in the range of 14.8-15.2% (up from the 14.1-14.6% range expected earlier), reflecting year-over-year growth of 12.1%. ROAD's earnings estimates for fiscal 2025 and 2026 have trended upward in the past 30 days by 10.3% to $2.14 per share and 1.5% to $2.71 per share, respectively. The estimated figures for fiscal 2025 and 2026 reflect 60.9% and 26.5% year-over-year growth, respectively. EPS Trend Image Source: Zacks Investment Research Analysts' sentiments are likely to have been boosted by the favorable market fundamentals and the company's upbeat fiscal 2025 expectations. Technical indicators suggest a continued strong performance for Construction Partners. From the graphical representation given below, it can be observed that ROAD stock is riding above both the 50-day simple moving average (SMA) and the 200-day SMA, signaling a bullish trend. The technical strength underscores positive market sentiment and confidence in ROAD's financial health and prospects. 50 & 200-Day SMA Image Source: Zacks Investment Research Construction Partners is currently trading at a premium compared with its industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The premium valuation indicates that the stock is trading above its industry peers, making it difficult for investors to figure out a suitable entry point. Image Source: Zacks Investment Research However, the overvaluation of ROAD stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up. Per the discussion above, this civil infrastructure company's prospects are gaining from its vertically-integrated business model, which is exceptionally aiding it in reducing supply-chain risks and expanding its margins. Especially in the current uncertain macro environment, such a strategic business model is coming in handy for the company against favorable public infrastructure spending must consider all the tailwinds against the probable market headwinds when deciding on any action to be taken in favor of ROAD after considering the favorable fundamentals and the trends of the technical indicators, this Zacks Rank #2 (Buy) stock is a decent choice to be added to the portfolio for now. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Drainage Systems, Inc. (WMS) : Free Stock Analysis Report Armstrong World Industries, Inc. (AWI) : Free Stock Analysis Report Installed Building Products, Inc. (IBP) : Free Stock Analysis Report Construction Partners, Inc. (ROAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
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10-05-2025
- Business
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Q2 2025 Construction Partners Inc Earnings Call
Fred Smith; President, Chief Executive Officer, Director; Construction Partners Inc Gregory Hoffman; Chief Financial Officer, Senior Vice President; Construction Partners Inc Ned Fleming; Executive Chairman of the Board; Construction Partners Inc Rick Black; Investor Relations; Dennard Lascar Investor Relations Kathryn Thompson; Analyst; Thompson Research Group Tyler Brown; Analyst; Raymond James Adam Thalhimer; Analyst; Thompson Davis & Co. Michael Feniger; Analyst; Bank of America Andrew Wittmann; Analyst; Baird Brent Thielman; Analyst; D.A. Davidson Companies Operator Greetings, and welcome to Construction Partners' Second Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this call is being is now my pleasure to introduce your whole Investor Relations with Rick Black. Thank you. You may now proceed. Rick Black Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners' conference call to review second quarter results for fiscal 2025. We -- this call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of recorded on this call speaks only as of today, May 9, and 2025. Please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are considered forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that, by their nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to our earnings press release from this morning for our disclosure on forward-looking statements. These factors and as well as other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange will also refer to non-GAAP measures including adjusted net income, adjusted EBITDA and adjusted EBITDA margin. Reconciliations to the nearest GAAP measures can be found at the end of the earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking now I would like to turn the call over to Construction Partners' CEO, Jule Smith. Jule? Fred Smith Thank you, Rick, and good morning, everyone. We appreciate you joining us on the call today. With me this morning are Greg Hoffman, our Chief Financial Officer; and Ned Fleming, our Executive Chairman. . I want to begin today's call by focusing on our organizational model and how important people are to our strategy at CPI as we surpassed 6,000 employees this month. The core of our business happens in our local markets, now numbering approximately 100 distinct market areas in 8 each of these, our local management team and workforce perform higher-margin, lower-risk projects and generate recurring revenue for repeat customers each year. Our people are the crucial element as we seek to take great care of our valuable customers and operate profitably. This local market model also provides a stable and predictable environment for our teams to bid, win and build work in their our family of company structure, nowhere our character, experience and talent, more important than in the management teams at our platform companies. In each state, these management teams steward our company culture, drive operational excellence and cultivate both organic and acquisitive growth opportunities. This is why last week, we were so excited to have PRI join us as our platform company in instantly expands our coverage the full length of the state and will include our pre-existing operations in the Nashville Metro area. A key strategic criteria in our platform acquisitions is an established and deeply experienced leadership team that fits our culture, our focus on safety and our relative market share growth strategy for further the leadership of Jon Hargett, Greg Ailshie, and PRI's entire management team, our new platform company will benefit from decades of collective experience and the technical expertise of seasoned industry veterans. Tennessee is growing, and we see excellent organic and acquisitive growth opportunities within the state, driven by strong economic expansion, favorable demographic trends and a healthy transportation funding now to the quarter. Outstanding operational performance led to Q2 year-over-year revenue growth of 54% and adjusted EBITDA growth of 135%. In addition, this marked our highest Q2 adjusted EBITDA margin in CPI's history at 12.1%. This strong margin expansion during the winter quarter was driven by great project and plant company's vertical integration assets in aggregates, services and AC terminals performed well. We continue to focus on building a great organization. And as we build scale, the benefits contribute to higher margins. For CPI, tariffs have not and are not expected to be a significant issue for the business, as most of our supply chain and raw material inputs are sourced Sunbelt states continue to benefit from healthy federal and state project funding, in addition to a population migration that is driving steady workflow of commercial projects. We are not currently seeing any sign of degradation to these fundamental factors that have been supporting healthy and growing markets to our footprint for years. Our backlog is evidence of this continued steady demand for our services as it grew to a record $2.84 billion. Heading into the heavy work season of our fiscal year, we are raising our outlook ranges, which Greg will discuss in his a closer look at market conditions in our Sunbelt states, local markets are growing, and states remain focused on maintaining and improving the quality of their roads as well as increasing capacity to handle the significant migration to their states. For CPI customers in our public markets, the IIJA and state funding will continue to provide healthy bidding environments. The IIJA provides for significant funds that have not yet been deployed and Congress is focused on the next five-year reauthorization of the surface transportation bill now. Secretary Duffy's comments in the past few weeks were positive on the reauthorization that continues to focus spending on hard infrastructure, which is a positive for commercial and private customers, we continue to experience steady bidding availability. Manufacturing moving back to the United States and specifically the Sunbelt is also a positive for CPI. Turning now to our strategic growth model. We remain focused on both organic and acquisitive growth. Organic growth and our revised guidance envisions a strong second half of the year, and we continue to have an extremely active acquisition Southeastern states have great opportunities. And as we enter new states in the Southwest, the math expands and even more opportunities present themselves. In the past year, we have entered into 2 new states, Texas and Oklahoma with platform acquisitions. And through PRI, we now have a platform company in with our existing platforms, these new companies serve as growth engines for CPI to both expand into new areas through bolt-on acquisitions and to increase market share organically. In both cases, we are able to grow revenues and, more importantly, expand margins in what remains an extremely fragmented forward, we continue to focus daily on our CPI strategy and delivering on our road map 2027 goals of top line growth of 15% to 20% annually and EBITDA expansion of 50 basis points per year through our three margin levers, building better markets, vertical integration and closing, we are very pleased with the second quarter results, and we're excited and ready for the busy spring and summer work season ahead. I'd now like to turn the call over to Greg. Gregory Hoffman Thank you, Jule. Good morning, everyone. I'll begin with a review of our key performance metrics for the second quarter of fiscal 2025 compared to the second quarter a year ago. I'll then discuss our revised outlook for fiscal 2025. Revenue was $571.7 million, an increase of 54% compared to the same quarter a year ago. The mix of our total revenue growth for the quarter was 7% organic revenue and 47% from recent a reminder, we began presenting acquisition-related expenses last quarter as a separate line item from general and administrative expenses on our income statement. G&A expenses are now presented in a manner that differentiates spend incurred to support day-to-day operations, from those expenses associated with acquisitive activity within the quarter. The prior year quarter also reflects this these changes, G&A expenses as a percentage of the total revenue in the second quarter of fiscal 2025 were 8.2% compared to 9.7% in the second quarter last year. As we continue to build scale, we are targeting G&A expenses for the fiscal year to be approximately 7.2% to 7.3% of revenue. As a reminder, FY24 G&A expenses were 8.3%.Net income was $4.2 million in the second quarter and $0.08 per diluted share compared to a net loss of $1.1 million and a diluted loss per share of $0.02 in the same quarter last year. Adjusted EBITDA was $69.3 million, an increase of 135% compared to the second quarter of fiscal '24. Adjusted EBITDA margin was 12.1% compared to 7.9% in the second quarter of last addition, as Jule mentioned, we are reporting a project backlog of $2.84 billion at March 31, 2025. The -- as a reminder, historically, CPI's backlog has declined sequentially during our heavy spring and summer work seasons. If this were to occur this year, we would not view it as a cause for concern. Rather, we would view it as a return to more seasonal patterns, albeit at a much higher percentage of the next 12 months contract revenue and backlog than in prior now to the balance sheet. We had $101.9 million of cash and cash equivalents and $248.4 million available under our credit facility at quarter end, net of reduction for outstanding letters of credit. As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 3.23 times. We remain on pace with our strategy of reducing the leverage ratio to approximately 2.5 times and -- in the next four quarters to support sustained profitable provided by operating activities was $55.6 million compared to $18.2 million in the same quarter a year ago. As discussed last quarter, the higher-than-expected level of billings and revenue in Q1 was realized as improved cash flow in this quarter. We remain on pace for FY25 to convert 80% to 85% of EBITDA to cash flow from expenditures for the second quarter were $41.4 million. We continue to expect total capital expenditures for fiscal 2025 to be in the range of $130 million to $140 million. This includes maintenance CapEx of approximately 3.25% of revenue with the remaining amount invested in new growth now to our outlook. Based on our recent outperformance and our current expectations for the remainder of this fiscal year, including the addition of PRI, we are raising all of our ranges for fiscal year 2025 increased ranges are as follows: revenue in the range of $2.77 billion to $2.83 billion. In regard to our overall revenue mix for the year, we now expect organic revenue to be in the range of 8% to 10%, up from our prior expectation of 7% to 8%. Net income in the range of $106 million $117 million, adjusted net income in the range of $122.5 million to $133.5 million, adjusted EBITDA in the range of $410 million to $430 million and adjusted EBITDA margin in the range of 14.8% to 15.2%.And with that, we will open the call to questions. Operator? Operator (Operator Instructions) Kathryn Thompson, Thompson Research Group. Kathryn Thompson Just first focusing on just the broader macro view and understanding that you generally have more quick type projects that are completed in 12 months -- in 12-month period. What if any project delays or cancellations are you seeing in your end given just some of the broader macro uncertainty in the US market. Fred Smith Kathryn. For us, it's -- we're seeing just business as usual. We do have projects that we book and burn within a year. We continue to do a lot of those projects. But the overall macro economy I feel like there's a little bit of a disconnect between what you might read in the news and what we're experiencing on the haven't seen any delays. We still have a healthy bid sheet in the commercial markets. So I would say we're really just business as usual. Kathryn Thompson That's helpful. And could you tell a little bit more about you've had two acquisitions kind of on the heels of each other, one in Texas last year and then in Tennessee announced last week. And it both appears to have higher structural margins versus CPI's core. Tell us a little bit more about which you can in terms of kind of why the margin differential? And what it is that you're looking for from an M&A standpoint? Fred Smith Yes. So we're excited about PRI joining us. And you're right, the acquisition of Lone Star helped us raise our margin profile going into this year. But what we've -- as I said in our prepared remarks, what we really look for in these platform acquisitions is a great management team. That's going to be the basis for years of future growth and PRI, we're excited. They do have a nice margin profile in the mid-teens. They do a great job in Knoxville, but also throughout the state and the pavement preservation expertise that they bring is something that's going to be very valuable to CPI. As far as the overall acquisitions, I'd just love to let add weigh in a little bit on some of his thoughts from a Board level. Ned Fleming Kathryn, now if you're doing well today. I think we see a lot of opportunity. The Jule has done a great job of making sure the organization is ready. Greg has done a great job to make sure that the balance sheet is ready. And -- but understand, we look at a lot of acquisitions, and we pass on a lot of them because from the very start, especially when we look for platform companies, we're looking for great people, excellent markets, good assets, bolt-on opportunities in growing one of the things that I think is really key, and we really, I think, proved that up with a Lone Star acquisition integration is a core competency. It has been since we founded the business. It was in the previous company that Charles ran. And so this is an organization that is prepared for and understands how to integrate interestingly enough, we see a lot of opportunities because of the culture that's been built here from the start. They want to be part of this team. And so Jule building the organization and really having a family of companies is key to it, and Greg has done a terrific job of keeping the balance sheet. So yes, we -- we may tip a little bit above three like we are today, and then it will go down. When you look at our cash flow generation at 85%, it's pretty we are going to always look for great platform companies that are generally led by people that we want to bring on as part of our team. And there's a lot of those opportunities. But make no mistake about it, we pass on a lot of opportunities. Kathryn Thompson Very helpful. And then final question just is on the capital allocation. You have 8%-plus cash flow through and a recently announced acquisition, obviously, which you just talked about, how should we think about capital allocation priorities in 2025? And in terms of where debt-to-EBITDA levels and how you're managing that? Fred Smith Well, as Greg said, we're on track to get back within our leverage ratio, our target leverage ratio in four quarters. We're on track for what we said when we acquired Lone Star. From a capital allocation standpoint, with the cash flow that's generated, we're going to pay down debt. But we're also going to make good smart acquisitions and continue to run our strategy as a growth company. . Operator Tyler Brown, Raymond James. Tyler Brown I just -- I kind of want to come back to PRI and maybe just talk a little bit more about that business. I think it only came with maybe on HMA plant. So does that -- does that kind of imply that it's just more focused on paving crews or specialty services? Or is there something unique about Tennessee where you can just buy FOB and don't need plants? Maybe just a little more color there. Fred Smith Yes, Tyler, good question. It's a little bit of all that. So PRI, as we said, stretch is almost a link to the state of Tennessee, which is a long state. And so in Knoxville, they do a lot of traditional things that we do in their East division. And in their Central and West division, they do paving, but they also do a lot of payment preservation, which we're excited about, because we do that to a certain degree in Alabama and Georgia, but these guys are experts at so -- and to your point, in the West, they have really good relationships with some producers there. And so they've chosen to buy FOB and to maintain their market share that way. But we're going to be expanding over time, just like we do with all our platform companies. We're excited to have Tennesseans taking over our Nashville operations, which is something we, back in 2022, we had as a goal, but we had to find the right platform management team. And so our Tennessee operation and folks led by Josh Miller, they're excited to be part of so I see the PRI following the typical platform model of integrating into our family of companies and then just looking for great growth opportunities. Ned Fleming Tyler. Yes. I think one of the things that Jule and the team has done terrific is this is just the first chest move in really the second chest move in Tennessee. This is a growing state. There's lots of opportunity not only did we get a wonderful company that's got nice margins, but we've got a great management team that we can grow and add bolt-ons on. So this is (inaudible) So speaking of test moves, I mean, it sounds like there's something unique about the pavement preservation piece. Is that something that you can replicate at the other platforms? . Fred Smith Yes. I mean, Taler, you're right. Payment preservation is, in a sense, just another way of taking care of the infrastructure. And every DOT, cities and counties use this as a tool in their toolkit to maintain infrastructure. And so we certainly have participated in that, but PRI does it at a different so whether it's chip selling, FOG selling, crack failing, there's just different ways that states extend the life of their pavements. Tyler Brown Interesting. Okay. Great. So if I could switch gears, Greg, can you just kind of help us a little bit with the modeling. So just based on what we know today, kind of what is the implied revenue contribution from M&A?I could probably do the math and back it out, but that's always scary. And then how much -- how much do you think hangs over into '26 already based on what you've already completed? Gregory Hoffman Yes. So well, first of all, I'll start with that. hanging over into the next year is about $150 million to $160 million -- million in revenue. So that's part of the answer. The other part of the answer is for kind of backing into 8% to 10% organic growth for the full I think that kind of leads you to the breakdown of acquisitive and organic. Tyler Brown Okay. Yes. I can kind of work that math. And then just real quickly, on the enterprise value, just to make sure that I have it all correct. So do you have what you've spent year-to-date on M&A?Basically, I'm just curious what the balance sheet looks like pro forma here into Q3. And was there any equity component to PRI? Or is an all-cash deal? Fred Smith It was -- Tyler, it was an all-cash deal at the typical multiples that we typically pay. And we expect our leverage ratio in our balance sheet to trend back down pretty steadily toward that 2.5% over four quarters. Operator Adam Thalhimer, Thompson Davis. Adam Thalhimer Congrats on the quarter and the PRI acquisition. Jule, you mentioned Southwest acquisitions. Could that be a new state? Or are you referring to tuck-ins in Oklahoma and Tennessee? Fred Smith Yes. Adam, specifically, what I was talking about is as we move into a new state like Texas and Oklahoma, our map expands. And so we just have more conversations with folks in those states, and we see that happening. But we're also talking a lot of folks in the Southeastern states as it's a busy time for acquisitions. As Ned said, we passed on quite a number of them, but they're ones that we see as just great strategic fits. But I was specifically referring that as we move into new states, we just have more opportunities to talk to folks in those states. Adam Thalhimer Got it. And then you briefly mentioned tariffs, but I was curious, I can't remember if you said anything about whether there's any inflation related to tariffs or not. Are you seeing that? Fred Smith We're not. Most of our supply chain is domestic. Almost all of it. We've not seen anything related to inflation from tariffs. And as you know, should things go up, we would simply put it in our pass-through model and pass it we just -- it has really been pretty much a nonissue for us, both on the supply chain and cost side, but also on the demand side and working with our customers. It's just -- it has not been a real factor so far. Adam Thalhimer Okay. And then lastly, can you just remind us what assets that you had in Nashville and kind of how they're going to integrate with PRI? Fred Smith Sure. Back in 2022, we made the deal with Blue Water and we've got three asphalt plants in a construction operation. Our asphalt plants are all in the Nashville suburbs east of Nashville. And we've been managing that from Huntsville and the -- our Alabama guys have done a great job of stewarding those assets, but we always knew that we wanted to find a Tennessee management team and platform company, and that's what we were able to do this month. Operator Michael Feniger, Bank of America. Michael Feniger I did want to just ask the organic growth, 11% in Q1 in Q2, 7%, it's clear based on the guide. Greg, you guys are going to still be doing high single-digit organic growth in the second half. We're seeing the national data like construction spending, especially on the private side is slowing. Do you think it's slowing -- is it just not slowing in your regions? Or is it -- is the underlying market slowing and you guys are gaining share because you've bought some assets over time, giving them bonding capacity so they're able to kind of go out that and maybe win more conscious of a question, when we see the organic growth, how much do you kind of think is you guys gaining some share out there? Or how much of it just really strong markets in your core regions? Gregory Hoffman Yes, that's a great point. I think you're good, you're right to bring that up because that's a good part of our story and that as we make these acquisitions, they're generating new organic growth. So it is new volumes to us. We're creating essentially our own growth through some of our acquisitive though, I would say that -- and I'm not sure what metric you're citing there, but we believe that in our markets, they're still very strong, both on the public and private side. And we're continuing to see new bidding activity year over year. Michael Feniger Great. And I just would love to talk about the price versus cost. We're seeing lower oil. I'd imagine over time that filters through to lower liquid asphalt. Just how are you seeing the pricing in the backlog that's going to come through in the back half?And just the bidding environment, just -- your margins have obviously expanded. I'm just wondering what is price versus cost spread, how we kind of think about this as we kind of move through the year with what we're seeing right now in diesel and liquid asphalt? Gregory Hoffman It's interesting, Mike. So usually, a barrel of crude and liquid AC correlate pretty well. Interestingly, they didn't at all in Q2 -- our Q2. Crude went down, liquid AC basically stayed flat. It has come down a little bit in April and on into May, but not then as far as diesel and natural gas, diesel has come down. Not in our -- not in Q2, but since Q2, the natural gas has gone up. So everything is moving in really strange directions. But I think generally, overall, when you talk about our cost environment, it's stable. Fred Smith Michael, I just want to circle back just for a minute on the organic growth. We give this number to you guys quarterly, just to help you. But the reality is you've really got to look at organic growth sort of in an annualized basis to get a meaningful number. And that's why we try to give you an annualized basis of 8% to 10%, which was higher than we saw at the beginning of the you're exactly right. As you've heard us say before, today's acquisitions become tomorrow's organic growth. When we do a bolt-on acquisition or a platform with CPI behind them, they're going to find ways to take advantage of opportunities in their market over time. And that's really what drives organic growth. Michael Feniger Helpful, Jule. And just if I could squeeze one last in there. Just are you hearing you're seeing anything on the funding side from your DOTs in terms of pauses or delays that might have occurred? And just how do you think about just going forward, it might be getting ahead of ourselves, but how do you think about that reauthorization at some point next year. Is that coming up in conversations at all?How do you guys kind of manage towards that, if that is something you kind of have to manage towards. Just kind of curious if you could kind of comment on your DOTs, what they're seeing in the funding levels, any delays and how you think about that reauthorization? Fred Smith Yes, Michael. It's not too early to talk about it because those conversations are going on in Washington on Capitol Hill. We had one of our platform company presidents, Todd Johnson, testify in front of the Transportation Committee last week on reauthorization. So we're very encouraged by what we're hearing from this to speak on the current funding, when people hear that the larger grant projects got paused, I would say two things. First, most of what CPI does is through the formula dollars anyway that go to the states. But even the grant projects, most of those, as the administration has said, is going to continue on, they just want a chance to look at it and make sure that those dollars are being spent for the best and highest purpose. And I would say this administration's focus on hard infrastructure and making sure dollars go to hard infrastructure is good for White House just last Friday, released their budget and even though a lot of the federal spending areas were reduced, the transportation budget actually increased. And so we feel like this administration is focused on building the infrastructure needs to support economic growth, and that's a good thing for CPI. Operator Andy Wittmann, Robert W. Baird. Andrew Wittmann I wanted to start with some questions on the backlog. And specifically, if you could comment on how the margins be implied as bid margins in your backlog today compared to the profit margins that you've recognized over the last year or so. . And then secondly, I guess, maybe for Greg, a technical question, but I'm just kind of curious as to how much of your backlog that was reported this quarter was due to acquisitions. Fred Smith Andy, I'll answer the first part, and Greg can answer a second. Our backlog margins continue to be healthy as is shown by our raised guide for EBITDA. But I would also say, CPI, over -- it's typical that as our crews and our teams go build the projects, they find ways to win and grow margin in the backlog, and that creates good quarters like the one we just we're seeing a lot of bid opportunities, and so that creates a healthy bidding environment. but then we find ways to go grow the margin. And that's typical for CPI.I'll let Greg answer on the breakdown of that backlog ahead. Gregory Hoffman Yes. So of the ad, Andy, about $133 million, $134 million was due to acquisitions and $50 million to $60 million due to just organic growth sequentially quarter over quarter. Andrew Wittmann Helpful. And then just for my follow-up, I wanted to ask a little bit, Jule, about -- I'm thinking back to the Analyst Day, actually, and you talked about becoming increasingly vertically integrated. This has always been part of something you've done, but thought at that date, it seemed like there's other areas that you were thinking always seemed to me like these would be areas for really good tuck-in acquisitions inside your platform companies. I would just like to hear you talk about that a little bit in terms of progress on that initiative to kind of fill in other services around the platform companies that you already have. What you've done, if any, there or what you see as potentially happening here inside of your M&A pipeline? Fred Smith Yes. Andy, you're right. Part of our vertical integration strategy is services and as well as liquid asphalt terminals and aggregates, which as I said in our remarks, those facilities really contributed very much to this quarter. And so that part of our strategy is working on the services side, as we've said before, two of the most value-added acquisitions we've done in the last few years, didn't have any asphalt plants, they were in our existing markets and added services. And so we continue to look for those kind of I will say we can also grow those services organically. We just this month, were awarded our first project in the upstate of South Carolina in Greenville that has a significant grading component. And our platform company, King Asphalt is going to be growing those services organically in-house with some grading and utility crews. And so that's an example of being able to vertically integrate more services, whether we do it organically or make a good acquisition, it's a way to capture more margin. Gregory Hoffman Yes. Andy, let me add to that, that some of those, to Jule's point, don't show up in the M&A side. They show up in the -- we talk a lot about our organic CapEx, right? So if we're spending 5%, 5.5% CapEx, 25% of that is maintenance CapEx those other -- that other percentage to get to that 5% to 5.5% is focused often on those adding services in the various companies. Operator Brent Thielman, D.A. Davidson. Brent Thielman Great quarter, guys. Just a follow-up on Greg, I'm not sure if you said it, but your CapEx expectations for this year just with PRI added now. Gregory Hoffman Yes, still around $130 million, $140 million. Brent Thielman $130 million, $140 million, sorry. Got it. And then obviously, you've done PRI, Jule. I love to hear what are the attitudes of sellers right now? I mean, obviously, a lot of noise in the world in the market, maybe in your corner of the country, things are have you sensed any shift in attitude, maybe -- maybe that's encouraged the pipeline to grow a little bit more because folks getting a little bit nervous about the environment? Just be curious what you're hearing from potential targets. Fred Smith Yes, Brent, good question. I would say that we have a very active pipeline and sellers are reaching out and talking to us. But it feels very much like it's still the typical things that drive them, which is their families planning, their life planning.I really don't think any sellers that I've talked to, and we've talked to a lot recently, are being driven by the headlines of today. They're more focused on what's long-term best for their business and their families. And a lot of them think that getting their employees and their businesses to be a part of CPI will be a good thing for the organization. And so that's helping us get to sit down in front of a lot of. Brent Thielman Okay. Maybe just the last question maybe from just a balance sheet management perspective. I mean, you scaled the business the time here in the last 12 months. I guess part of the question is, with that scaling up, is there a certain level of cash you want to maintain on the balance sheet?And I guess the second part of it would be, obviously, you want to maintain leverage targets, you're going to grow EBITDA. Is there any appetite to reduce debt levels here in the next 12 months? Gregory Hoffman Yes, absolutely. I mean, we'll -- we said in the remarks that we're going to generate from EBITDA about 80% to 85% of that would turn into cash from operations. So, we're going to use whatever makes sense to pay down debt there. And certainly, that's factored into our discussion of leverage ratio over the next four quarters and getting down back down to that 2.5 far as cash on the balance sheet, I guess we're always thinking somewhere in the neighborhood of 3% to 5% of revenue just as a way to keep our operations role every day. Brent Thielman Got it. If I could slip one more in. I think I'm batting cleanup here. So like just on -- Jule, when you look across the platform and state budgets, are there some markets like you're particularly excited about when you look at those budgets and what you see coming here in the next 6 to 12 months in terms of funding for infrastructure projects? Fred Smith Yes, Brent, I read an industry report a couple of weeks ago that talked about how with the federal infrastructure increase that IIJA created with the surface transportation bill and the states doing their own initiatives, certainly in our footprint, there's been sort of a snowball effect in contract awards, and I agree with that. We're seeing all of our states, we have a healthy bid list. Clearly, being in Texas and Florida, those are just outsized programs because of the outsized growth of those states. But when you look at Tennessee and South Carolina and Georgia and North Carolina, it's just a healthy environment. Right now, all of those states have taken initiatives to supplement the increased federal we feel like 2026 is going to be a very -- continue to be a significant increase in transportation funding. In 2025, contract awards in our states are up around 15% to 16% just over last year. So just as we've been saying for a while now, it's a healthy bidding environment. Operator Thank you. At this time, I would like to turn the call back over to management for closing comments. Fred Smith I'd like to thank everyone for joining us today, and we look forward to talking next quarter. Operator Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-05-2025
- Business
- Yahoo
Construction Partners (NASDAQ:ROAD) Surprises With Q1 Sales, Guides for Strong Full-Year Sales
Civil infrastructure company Construction Partners (NASDAQ:ROAD) beat Wall Street's revenue expectations in Q1 CY2025, with sales up 53.9% year on year to $571.7 million. The company's full-year revenue guidance of $2.8 billion at the midpoint came in 3.7% above analysts' estimates. Its GAAP profit of $0.08 per share was significantly above analysts' consensus estimates. Is now the time to buy Construction Partners? Find out in our full research report. Revenue: $571.7 million vs analyst estimates of $559.9 million (53.9% year-on-year growth, 2.1% beat) EPS (GAAP): $0.08 vs analyst estimates of -$0.05 (significant beat) Adjusted EBITDA: $69.27 million vs analyst estimates of $53.75 million (12.1% margin, 28.9% beat) The company lifted its revenue guidance for the full year to $2.8 billion at the midpoint from $2.7 billion, a 3.7% increase EBITDA guidance for the full year is $420 million at the midpoint, above analyst estimates of $381.9 million Operating Margin: 4.8%, up from 0.8% in the same quarter last year Free Cash Flow was $28.07 million, up from -$8.08 million in the same quarter last year Backlog: $2.84 billion at quarter end Market Capitalization: $5.17 billion Fred J. (Jule) Smith, III, the Company's President and Chief Executive Officer, said, "We are pleased to report a strong second quarter marked by significant year-over-year growth in revenues, net income and Adjusted EBITDA, leading to an Adjusted EBITDA margin of 12.1%, up more than 400 basis points from the same quarter last year. Continuing the substantial momentum established in the first quarter of our fiscal year, the operational performance of our family of companies was outstanding, especially during this winter quarter, when shorter days and colder weather typically limit construction activity. Throughout our Sunbelt footprint, our local teams continued to win more project work, growing our project backlog to a record $2.84 billion. We are well-positioned for continued success to build out this record backlog as we move into the busy construction work season in the second half of our fiscal year. We continue to experience healthy federal and state project funding across our geographies in addition to a steady workflow of commercial projects, with many of our local markets representing some of the fastest growing MSAs in the Sunbelt." Founded in 2001, Construction Partners (NASDAQ:ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects. Examining a company's long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Construction Partners's sales grew at an incredible 22% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis. Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Construction Partners's annualized revenue growth of 23.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. This quarter, Construction Partners reported magnificent year-on-year revenue growth of 53.9%, and its $571.7 million of revenue beat Wall Street's estimates by 2.1%. Looking ahead, sell-side analysts expect revenue to grow 30.5% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will catalyze better top-line performance. Unless you've been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) stock benefiting from the rise of AI. Click here to access our free report one of our favorites growth stories. Construction Partners was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.8% was weak for an industrials business. This result isn't too surprising given its low gross margin as a starting point. Looking at the trend in its profitability, Construction Partners's operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company's expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. In Q1, Construction Partners generated an operating profit margin of 4.8%, up 3.9 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead. We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable. Construction Partners's EPS grew at a decent 8.1% compounded annual growth rate over the last five years. However, this performance was lower than its 22% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded. Diving into the nuances of Construction Partners's earnings can give us a better understanding of its performance. A five-year view shows Construction Partners has diluted its shareholders, growing its share count by 7.8%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals. Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business. For Construction Partners, its two-year annual EPS growth of 67.3% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history. In Q1, Construction Partners reported EPS at $0.08, up from negative $0.02 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Construction Partners's full-year EPS of $1.17 to grow 102%. We were impressed by how significantly Construction Partners blew past analysts' revenue, EPS, and EBITDA expectations this quarter. We were also excited it lifted its full-year revenue and EBITDA guidance. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 3.7% to $95.95 immediately following the results. Sure, Construction Partners had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it's free. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
