Morningstar | Currency Headwinds Weigh on CRH’s Profits in First-Half 2018; Shares Look Roughly Fairly Valued
In the first quarter, CRH’s Americas and European operations struggled to generate revenue growth, as weather and timing of holidays weighed on results. The company didn’t face the same challenges in the second quarter, allowing for meaningful revenue acceleration across most of its business in these regions.The outlook for the Americas operations is favorable, as end-market demand remains strong. Similarly, the improving economic outlook in Europe should signal continued improvement for CRH’s business in the region. Unfortunately, the same optimism cannot be applied to CRH’s Asia division, as competitive markets and pricing pressures weighed on results. For the Asia operations in the first half of the year, sales were down 2% from the prior year, and EBITDA declined nearly 60% amid a 760-basis point margin contraction.
There were few developments that impacted our outlook for the company. However, we’ve lowered our U.S. dollar-denominated fair value estimate slightly to USD 37 per share from USD 38 due to currency effects. Our British pound-denominated fair value estimate rises slightly to GBX 2,900 per share from GBX 2,800 also due to updated exchange rates. CRH’s no-moat rating is unchanged. Trading at roughly USD 33 and GBX 2,600 per share, we think shares are fairly valued after adjusting for CRH’s high uncertainty rating.
CRH is a diversified international building materials company. Co. is engaged in the manufacture and distribution of a range of building materials products from the fundamentals of heavy materials and elements to construct the frame, through value-added products that complete the building envelope, to distribution channels which service construction fit-out and renewal. Co. operates seven operating segments: Europe Heavyside, Europe Lightside, Europe Distribution, Americas Materials, Americas Products, Americas Distribution and Asia.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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