On Tuesday, Baird increased its price target on shares of Construction Partners Inc (NASDAQ: NASDAQ:ROAD) to $92.00, up from the previous $68.00, while maintaining a Neutral rating on the stock.
The adjustment comes in response to the company's recent acquisition of Lone Star Paving (LSP), which represents the largest acquisition in Construction Partners' history.
The analyst at Baird expressed a positive outlook on the company's strategic move to enter the Texas markets, which are both large and exhibiting growth. The acquisition's potential to immediately boost earnings was noted, particularly due to LSP's impressive margin profile exceeding 20%. The addition of 10 Hot Mix Asphalt (HMA) plants, combined with an experienced management team and a solid reputation, positions Construction Partners to potentially secure further bolt-on acquisitions. These factors are expected to enhance and prolong the company's growth trajectory.
"We remain neutral on valuation but like the deal and still see a favorable growth outlook ahead," Baird analysts said.
Construction Partners Inc is known for its work in the construction and maintenance of roadways across the Southeastern United States. With the acquisition of Lone Star Paving, the company aims to leverage new opportunities in the Texas market, which could lead to further expansion and growth in the future.
The company acquired Lone Star Paving for $654 million, a strategic move expected to contribute an estimated $530 million in annual revenue and $120 million in Adjusted EBITDA.
In other recent news, Construction Partners Inc. has reported strong fiscal 2024 results, projecting a significant growth in revenue and net income. The civil infrastructure company expects revenues between $1.821 billion and $1.825 billion, and net income between $68 million and $70 million for fiscal 2024.
DA Davidson has increased the price target for Construction Partners to $75, maintaining a Neutral rating on the stock. This adjustment comes as the company extends its platform into new growth territories. The company's valuation is supported by various factors including the potential for margin improvement with the integration of Lone Star, expansion opportunities in the Texas market, and ongoing organic growth in core markets.
InvestingPro Insights
Construction Partners Inc (NASDAQ: ROAD) has been experiencing significant momentum in the market, aligning with Baird's positive outlook on the company's growth prospects. InvestingPro data reveals that ROAD has seen a remarkable 121.84% price total return over the past year, with a 67.86% increase in the last six months alone. This strong performance is reflected in the stock trading near its 52-week high, with the current price at 98.49% of that peak.
The company's recent acquisition of Lone Star Paving appears to be well-timed, given ROAD's solid financial position. InvestingPro Tips indicate that the company operates with a moderate level of debt and its liquid assets exceed short-term obligations, suggesting financial stability to support expansion efforts.
However, investors should note that ROAD is trading at high valuation multiples, with a P/E ratio of 65.72 and a Price/Book ratio of 8.08. This aligns with Baird's neutral stance on valuation, implying that much of the growth potential may already be priced in.
For those seeking a deeper analysis, InvestingPro offers 19 additional tips for ROAD, providing a comprehensive view of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.