DOTHAN, Ala. - Construction Partners, Inc. (NASDAQ: NASDAQ:ROAD), a civil infrastructure firm, has agreed to acquire Asphalt Inc., LLC, doing business as Lone Star Paving, expanding its operations into Texas. The $654 million deal, a mix of cash and stock, includes 10 hot-mix asphalt plants, four aggregate facilities, and one liquid asphalt terminal.
The acquisition is expected to be immediately accretive to CPI's earnings upon the anticipated closing in Q1FY25. It is projected to contribute an annualized run-rate of $530 million in revenue and $120 million in Adjusted EBITDA in fiscal 2025.
Lone Star, a vertically integrated asphalt manufacturing and paving company, has a significant presence in central Texas, serving high-growth metropolitan areas including Austin, San Antonio, and Temple-Killeen. The transaction aligns with CPI's long-term growth strategy and is expected to accelerate the company's ROAD-Map 2027 goals, potentially reaching an Adjusted EBITDA Margin goal of 13% to 14% in fiscal 2025, two years ahead of schedule.
CPI President and CEO Fred J. Smith III remarked on the cultural and operational alignment between CPI and Lone Star, praising Lone Star's market leadership and growth potential in Texas. Jack Wheeler, Lone Star's founder and CEO, and Dean Lundquist, its newly named President, expressed optimism about joining CPI and the future growth opportunities.
The acquisition will be financed through debt and the issuance of 3 million shares of CPI's Class A common stock. The closing is subject to regulatory approvals and customary conditions.
CPI has scheduled a conference call for investors today to discuss the transaction details further. This acquisition marks CPI's entry into the Texas market, adding to its portfolio of projects that include roadways, highways, airport runways, and bridges across six southeastern states.
The information for this article is based on a press release statement.
In other recent news, Construction Partners Inc . has seen a significant upward revision in its stock target and an overall positive assessment of its financial prospects. The company's fiscal third-quarter performance exceeded analysts' estimates, leading to an upward revision of the stock target to $55.00. This performance, coupled with a substantial backlog of orders, has provided further visibility into the company's fiscal year 2025, prompting an increase in forecasts.
The company's strong fiscal third-quarter results were notably above expectations, leading to an upward revision of estimates for fiscal year 2025 and the provision of initial forecasts for fiscal year 2026. Analysts from DA Davidson and Baird have both raised their price targets for the company, reflecting a positive outlook on the company's financial performance in the coming years.
The company's robust fiscal third-quarter results have also led to an increase in its full-year guidance for fiscal 2024. Revenue for the quarter came in at $517.8 million, up 22.7% year-over-year and ahead of analysts' projections of $503.57 million. The raised outlook for fiscal 2024 reflects sustained industry demand and outstanding operational performance across the company's family of companies.
In addition to these financial highlights, Construction Partners Inc. has also seen its project backlog reach a record $1.86 billion at quarter-end, up from $1.59 billion a year ago. This backlog, covering 80% of the next twelve months capacity, allows the company to be selective in future bidding processes, offering better-than-normal visibility into potential revenue streams.
InvestingPro Insights
Construction Partners, Inc.'s (NASDAQ: ROAD) acquisition of Lone Star Paving aligns well with the company's strong financial performance and growth trajectory. According to InvestingPro data, ROAD has demonstrated impressive revenue growth of 18.84% over the last twelve months, with quarterly revenue growth reaching 22.73% in Q3 2024. This robust growth is reflected in the company's stock performance, which has seen a remarkable 95.65% price return over the past year.
The acquisition's potential to be immediately accretive to earnings is particularly noteworthy given ROAD's current financial metrics. The company's P/E ratio stands at 54.7, which may seem high, but an InvestingPro Tip suggests that ROAD is trading at a low P/E ratio relative to its near-term earnings growth. This indicates that the market may not have fully priced in the company's growth potential, including the benefits of this acquisition.
Another relevant InvestingPro Tip highlights that ROAD operates with a moderate level of debt, which could be advantageous as the company finances this significant acquisition through a combination of debt and stock issuance. This balanced approach to funding the deal may help maintain financial flexibility while pursuing aggressive growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for ROAD, providing a deeper understanding of the company's financial health and market position.
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