Morningstar | U.S. Concrete's Year-to-Date Stock Price Performance Doesn't Match Its Financial Performance. See Updated Analyst Note from 01 Nov 2018
We've observed a stark disconnect between U.S. Concrete’s stock price performance and its financial performance year to date. The stock has traded 60% lower even though financial results have been only somewhat disappointing. As we’ve argued for much of the year, we don’t think the negative share price pressure on building materials companies, probably stemming from fears of a slowing economy, is warranted. These companies continue to increase revenue and profitability as the construction cycle doesn’t look as if it’s peaking anytime soon.In the third quarter, U.S. Concrete's adjusted EBITDA declined 2% to $53.6 million, with margins contracting 210 basis points to 13.3% amid challenging weather in Texas and the Northeast. Given that weather was the driver of the guidance cut, we think this recent margin contraction will prove fleeting. We see signs that underlying demand remains strong, as organic price per ton grew nearly 10% and roughly 2% for aggregates and concrete, respectively, over the prior-year quarter.
Due partly to the weather disruptions, U.S. Concrete lowered its full-year revenue outlook to $1.50 billion-$1.55 billion from $1.52 billion-$1.62 billion. It also lowered EBITDA guidance to $200 million-$208 million from $215 million-$232 million. We’ve reduced our near-term forecasts but largely maintained our long-term outlook, leading us to trim our fair value estimate to $70 per share from $73 for no-moat U.S. Concrete. Our fair value estimate is based on roughly 9% top-line growth through 2022 as strong construction demand drives better volume and prices. We believe the current share price implies only half of this top-line growth, portending a significant slowdown in growth that we think is unjustified.
For more details on our view of U.S. road construction, please see our report "Aggregates Stocks Are Priced for Growth--Do They Deserve It?"
U.S. Concrete is a holding company. Through its subsidiaries, the company is engaged as a producer of ready-mixed and as a supplier of aggregates. The company's products comprised of: ready-mixed concrete, which products consist of proportioned mixes it produces and delivers in an unhardened plastic state for placement and shaping into designed forms at the job site; aggregates products, which sells these aggregates for use in commercial, industrial and public works projects in the markets they serve; and other, which includes the company's building materials stores, hauling operations, aggregates distribution terminals, a recycled aggregates operation and concrete blocks.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.