EUR 850.00 For Business Accounts Only

Morningstar | CRH's Solid 1Q Results a Good Start to 2019, but Shares Look Fairly Valued

CRH's companywide sales rose 7% year over year in the first quarter, benefiting from higher volume from milder weather as well as pricing increases. The first quarter is typically subject to seasonal weakness, but the strong start across all three segments bodes well for the full year, barring adverse weather. CRH guided to first-half group EBITDA above EUR 1.5 billion and second-half EBITDA ahead of last year’s EUR 2.2 billion. We forecast roughly EUR 3.8 billion in 2019, so the company's guidance looks achievable to us.

At the start of 2019, CRH reorganized from six segments--Europe Heavyside, Europe Lightside, Europe Distribution, Americas Materials, Americas Products, and Asia--into three segments: Europe Materials, Americas Materials, and Building Products. The company’s first-quarter trading statement provides limited data, so we’re unable to update our model until first-half earnings are released this summer. However, overall company commentary on first-quarter performance and full-year expectations is largely in line with our view. As such, we’re maintaining our fair value estimates of $35.50 and GBX 2,700 per share.

Our no-moat rating is unchanged. However, CRH continues to shift away from its no-moat distribution business toward typically moatworthy cement and aggregates. Should the company do so in a manner that avoids destroying shareholder capital, we would consider revisiting our moat rating.

On a risk-adjusted basis, the shares look fairly valued to us at this time.