Loop Capital has adjusted its outlook on Core & Main Inc. (NYSE: CNM), a prominent distributor of water, wastewater, storm drainage, and fire protection products.
The firm reduced the price target to $52 from the previous $64 while maintaining a Buy rating on the company's stock.
The revision follows Core & Main's reported second-quarter 2024 earnings, which fell short of expectations, prompting the company to revise its full-year 2024 guidance downward due to weaker-than-expected end-market demand.
Core & Main's second-quarter performance was notably affected by adverse weather conditions and a slowdown in demand. The company saw delays in municipal projects and a decline in new lot development, attributed to a reduction in single-family housing starts.
These factors led to the company missing its second-quarter targets and adopting a more cautious view of end-market demand, resulting in a lowered forecast for FY24 adjusted EBITDA to a range of $900 million to $930 million, down from the previously anticipated $935 million to $975 million.
Despite the setbacks in the second quarter, Core & Main experienced some recovery in August, with a slight uptick in volumes due to pent-up demand after the unfavorable weather. However, the company anticipates that some demand will shift into FY25 because of labor shortages and continued project delays exacerbated by rising interest rates.
Core & Main reported mixed second-quarter results. The company's net sales increased by 6% to reach $1.96 billion, primarily driven by acquisitions. However, due to lower-than-expected end-market volumes, Core & Main has revised its full-year net sales and adjusted EBITDA projections downwards.
Truist Securities, RBC Capital, and Baird have all adjusted their outlook on Core & Main shares, lowering the price target while maintaining a neutral to positive rating. Truist Securities reduced the price target to $38.00, citing a broad weakening of end-user markets. RBC Capital and Baird lowered their price targets to $53.00, despite anticipating potential positive developments for Core & Main in the longer term.
As part of its growth strategy, Core & Main announced a $500 million share repurchase program and remains optimistic about long-term growth opportunities. The company also completed several acquisitions and announced two additional ones post-quarter.
InvestingPro Insights
Core & Main Inc. (NYSE:CNM) has been navigating a challenging market, reflected in recent price movements and financial metrics. According to real-time data from InvestingPro, the company has a market capitalization of $7.94 billion, with a P/E ratio of 18.53, suggesting that investors are maintaining expectations for future earnings despite the current headwinds. The revenue growth for the last twelve months as of Q1 2025 stands at 3.65%, indicating a modest increase amidst the market difficulties.
InvestingPro Tips highlight that Core & Main's management has been actively buying back shares, signaling confidence in the company's future. Additionally, the stock is currently in oversold territory according to the Relative Strength Index (RSI), which could attract investors looking for potential value opportunities. With the stock having taken a significant hit over the last few months, these insights could provide a silver lining for investors considering the company's long-term growth prospects.
For those seeking a deeper analysis, InvestingPro offers additional tips on Core & Main, which may further inform investment decisions. The platform's comprehensive set of tools and data points, including analyst predictions and profitability assessments, are available for those interested in a more granular approach to their investment strategy.
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