EUR 850.00 For Business Accounts Only

Morningstar | Regional Outlooks Appear to Be Improving for CRH, but Shares Are Fairly Valued

In 2018, CRH's EBITDA rose 7% over the prior year to nearly EUR 3.4 billion. Acquisitions boosted results, as organic EBITDA growth was slower at 3%. Continued stabilization in Europe and strength in the Americas helped offset continued challenges in the company’s Asia businesses, where EBITDA fell 44%.

CRH did not provide specific 2019 guidance other than signaling continued progress across all three markets. We forecast 13% EBITDA growth in 2019, with nearly one third stemming from synergy realization at Ash Grove, a Florida cement plant, and other recent acquisitions. The remaining growth primarily stems from further contribution from recently acquired assets and the continued strength in the U.S. construction market. We forecast 14% EBITDA growth for CRH’s Americas businesses. We forecast 7% EBITDA growth for CRH’s Europe businesses, although results will be mixed across the various countries. For Asia, we forecast roughly flat EBITDA, a significant improvement from the massive losses in recent years. Of note, management guidance suggests improved profits in the Philippines’ cement market.

We’ve left our dollar-denominated fair value estimate unchanged at $35.50 per share. We've lowered our pound-denominated fair value estimate to GBX 2,700 per share from GBX 2,800 due to changes in exchange rates. CRH’s no-moat rating is unchanged.

After the company’s third-quarter earnings release, we saw an opportunity to acquire shares at an attractive risk-adjusted discount. Since then, shares have risen more than 15% and are now fairly valued on a risk-adjusted basis.