Advanced Drainage Systems Reports Exceptional Q4 and FY 2024 Results

By Don Francis, Editor
May 18, 2024 10:32 AM UTC
Advanced Drainage Systems Reports Exceptional Q4 and FY 2024 Results

Stephens & Co.'s Trey Grooms raised their price target on Advanced Drainage Systems (NYSE: WMS) by 6% from $182 to $193 on 2024/05/17. The analyst maintained their Strong Buy rating on the stock.

After reviewing Advanced Drainage Systems' fourth quarter and full-year 2024 financial results, Grooms described the company's performance as exceptional. Grooms noted that the company reported increased revenue and wider profit margins across the board. However, Grooms mentioned that while adjusted EBITDA was flat and margins improved, the midpoint of management's fiscal year 2025 revenue outlook fell somewhat below expectations.

Grooms predicted that the margin increase from volume leverage would be sustained throughout the year, but reaching the same margins as the first quarter of 2024 would be challenging due to the significant price/cost benefits experienced in the previous period.

In the fourth quarter of 2024, Advanced Drainage Systems reported earnings per share (EPS) of $1.23, beating the Zacks Consensus Estimate of $0.95 by 9.8%. The company also reported revenue of $653.8 million, surpassing the Zacks Consensus Estimate of $620 million by 5.9%. Additionally, Advanced Drainage Systems reported EBITDA of $191.2 million, representing an 11.2% year-over-year increase.

For the full year 2024, the company reported EPS of $6.39, a 3.7% increase compared to the previous year. The revenue for the year stood at $2.87 billion, down 6.4% year-over-year. However, the company's EBITDA increased by 2.1% to $922.9 million. The capital expenditure (capex) for the year also saw a 10.1% year-over-year increase, reaching $183.81 million.

Looking ahead, Advanced Drainage Systems' management provided guidance for fiscal year 2024. They anticipate revenue in the range of $2.925 billion to $3.025 billion, EBITDA in the range of $940 million to $980 million, and capex in the range of $250 million to $300 million.

President & CEO Scott Barbour expressed pride in the company's performance in fiscal year 2024. Despite a weaker demand environment in the first half of the year, which led to a 6% decrease in net sales, Barbour highlighted that it was the company's ninth consecutive year of record profitability. He emphasized Advanced Drainage Systems' commitment to driving above-market performance in the stormwater and onsite septic wastewater industries.

Barbour also pointed out that the company's focus on highly engineered solutions positions it as a pivotal player in effectively managing water, which he referred to as the world's most precious resource. He expects favorable demand to drive volume growth in the residential and infrastructure markets, as well as stability in the non-residential construction market in fiscal year 2025. Barbour also highlighted the importance of ADS' products and solutions in protecting communities from the impacts of climate challenges.

In addition to Trey Grooms' rating and price target increase, other analysts also updated their ratings for Advanced Drainage Systems on May 17, 2024. Jeffrey Hammond from KeyBanc raised their price target by 5.4% to $195 and maintained their Strong Buy rating on the stock. Matthew Bouley from Barclays raised their price target by 6.9% to $202 and maintained their Strong Buy rating. Michael Halloran from Baird raised their price target by 4.2% to $200 and maintained their Buy rating.

It is worth noting that 100% of the top-rated analysts currently rate WMS as a Strong Buy or Buy. No analysts see it as a Hold, and no analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts is that Advanced Drainage Systems' upcoming year will deliver earnings per share (EPS) of $7.63. If the analysts' predictions hold true, the next yearly EPS will be up by 17% on a year-over-year basis.

Since the release of Advanced Drainage Systems' latest quarterly report on May 16, 2024, the stock price has increased by 1%. Year-over-year, the stock is up by an impressive 96.4%. During that period, Advanced Drainage Systems has outperformed the S&P 500, which has seen a 27.5% increase.

Stephens & Co. analyst Trey Grooms, who raised the price target on Advanced Drainage Systems, is ranked in the top 2% of Wall Street analysts by WallStreetZen. Grooms specializes in the Industrials, Basic Materials, and Consumer Cyclical sectors and has an average return of 33.5% with a 78.9% win rate.

Advanced Drainage Systems Incorporated is a manufacturer of thermoplastic corrugated pipes and related water management products. They provide drainage solutions for use in underground construction and infrastructure in the US and internationally. The company offers a range of products, including single, double, and triple wall corrugated polypropylene and polyethylene pipes, plastic leachfield chambers and systems, EZflow synthetic aggregate bundles, mechanical aerated wastewater solutions, septic tanks and accessories, and combined treatment dispersal systems. Advanced Drainage Systems was incorporated in 1966 and is headquartered in Hilliard, Ohio.

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