Impressive Margin Growth and Improved End Markets Propel Advanced Drainage Systems

By Don Francis, Editor
February 10, 2024 9:47 AM UTC
Impressive Margin Growth and Improved End Markets Propel Advanced Drainage Systems

KeyBanc's Jeffrey Hammond raised their price target on Advanced Drainage Systems (NYSE: WMS) by 15.6% from $160 to $185 on 2024/02/09. The analyst maintained their Strong Buy rating on the stock.

Following Advanced Drainage Systems' Q3 2024 earnings call on February 8, 2024, an analyst expressed their positive sentiments towards the company's sustained margin growth and improved end markets. The analyst stated, "I am impressed by the degree of sustained margin growth as end markets improved more meaningfully."

In the reported Q3 2024 results, Advanced Drainage Systems exceeded expectations. The company reported an earnings per share (EPS) of $1.37, surpassing the Zacks Consensus Estimate of $0.93 by 35.6%. In comparison to Q3 2023's EPS of $1.01, Advanced Drainage Systems showcased strong growth. Additionally, the company reported revenue of $662.37 million, beating the Zacks Consensus Estimate of $625.61 million by 1.1%. This also marked a slight improvement compared to Q3 2023's revenue of $665.17 million.

Looking ahead, Advanced Drainage Systems provided guidance for FY 2024. The company expects revenue in the range of $2.8 billion to $2.85 billion. Furthermore, Advanced Drainage Systems anticipates adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) between $880 million and $910 million. The President and CEO, Scott Barbour, acknowledged the improved demand environment and increased profitability. However, he also highlighted the uncertainty in the non-residential end market due to high interest rates and tight credit standards. Barbour emphasized the company's commitment to providing exceptional service to customers, pursuing profitable growth, and investing capital and resources to drive future growth and profitability.

In addition to the analyst's positive rating, Trey Grooms from Stephens & Co. also provided an update on Advanced Drainage Systems on February 9, 2024. Grooms raised the price target by 31.9% from $138 to $182 and maintained a Strong Buy rating on the stock.

It is worth noting that all top-rated analysts currently rate Advanced Drainage Systems as either a Strong Buy or Buy. No analysts consider it a Hold, and there are no recommendations to sell the stock.

The consensus forecast among analysts suggests that Advanced Drainage Systems will deliver earnings per share (EPS) of $7.01 for the upcoming year. If this prediction holds true, it would represent a 10.1% increase in EPS on a year-over-year basis.

Since the release of Advanced Drainage Systems' latest quarterly report on February 8, 2024, the stock price has increased by 2.6%. On a year-over-year basis, the stock has surged by 74.1%. During this period, Advanced Drainage Systems has outperformed the S&P 500, which has seen a growth of 23.2%.

KeyBanc analyst Jeffrey Hammond, who raised the price target on Advanced Drainage Systems, is ranked in the top 9% of Wall Street analysts by WallStreetZen. With an average return of 8.2% and a win rate of 54.9%, Hammond specializes in the Consumer Cyclical, Basic Materials, and Industrials sectors.

Advanced Drainage Systems Incorporated is a manufacturer of thermoplastic corrugated pipes and water management products. The company offers drainage solutions for underground construction and infrastructure in the US and internationally. Their product line includes 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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