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Why This Under-the-Radar Renewable Energy Stock is a 'Strong Buy'
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Arcosa, Inc. (ACA - Free Report) is not a solar name or a true pure-play renewable energy stock. Instead, the infrastructure products and solutions firm is benefitting from multiple megatrends including renewable energy, electrification, telecom expansion, nationwide infrastructure spending, and more.
ACA provided fantastic guidance in late April that’s helped send the stock to fresh highs. Even though Arcosa stock has climbed by 55% in the last year and crushed the market since ACA’s debut in late 2018, its valuation is far from overheated and Arcosa still sits solidly below its current average Zacks price target.
U.S. Infrastructure Spending Boom
Arcosa provides infrastructure-related products and solutions across construction, engineered structures, and transportation markets. Arcosa is benefitting from megatrends such as aging infrastructure, as well as the “continued shift to renewable power generation, and the expansion of new transmission, distribution, and telecommunications infrastructure.”
Arcosa’s growth has been solid since it spun off from Trinity Industries in late 2018. ACA crushed Zacks Q1 earnings estimate in late April and provided hugely upbeat guidance. ACA’s fiscal 2023 consensus estimate has surged by 44% since its report, with FY24’s figure 38% higher. ACA’s bottom-line positivity helps it grab a Zacks Rank #1 (Strong Buy) right now.
Image Source: Zacks Investment Research
Arcosa’s engineered structures division includes utility structures, telecom structures, wind towers, and beyond. ACA’s wind tower business is booming, having landed wind tower orders worth over $1.1 billion that extend into 2028 since the passage of the Inflation Reduction Act (August 2022).
ACA is benefitting directly from the $1 trillion U.S. Infrastructure Bill and the $370 billion Inflation Reduction Act, which Arcosa executives expect will create multi-year tailwinds for many of its businesses.
The gusts at Arcosa’s back include grid-hardening, electrification of vehicles, connecting renewable energy to the grid, the wireless 5G telecom buildout, and more. Arcosa is building out a new manufacturing facility in New Mexico to support its wind industry growth, particularly in the Southwest.
Image Source: Zacks Investment Research
Other Fundamentals
Zacks estimates call for Arcosa’s adjusted 2023 earnings to surge by 27% and then jump another 18% higher in 2024 to reach $3.26 per share. ACA has topped our EPS estimates by an average of 60% in the trailing four quarters, including a 112% beat in Q1.
The company’s revenue is projected to come in roughly flat YoY in 2023. ACA divested its storage tanks business in October 2022. Once the comparisons are smoothed out, Zacks calls for Arcosa to post 10% revenue growth in 2024 to reach $2.46 billion.
Image Source: Zacks Investment Research
Arcosa shares surged following its late-April release and it has hit multiple new highs over the last month-plus. ACA is up 32% YTD and 55% in the last year to crush the S&P 500’s 21% run and its highly-ranked Zacks industry’s 38%. ACA stock has climbed 160% since it began trading in late 2018 to blow away the S&P 500’s 64% and its industry’s 82%.
ACA is cooling off a bit recently, having recently slipped out of overbought RSI territory to closer to neutral. Arcosa still trades far above its 50-day moving average, and ACA sits 13% below its average Zacks price target.
Despite Arcosa’s market and industry-topping performance over the last 12 months and five years, ACA is trading at a 30% discount to its own highs at 24.1X forward 12-month earnings.
Image Source: Zacks Investment Research
Bottom Line
The $3.5 billion market cap firm with an average trading volume of around 215K is gaining more positive attention from Wall Street, according to Zacks brokerage recommendations. Arcosa pays a very small dividend at the moment, but it has plenty of room to slowly raise the payout going forward.
Overall, Arcosa appears to be a somewhat under-the-radar and strong way to gain exposure to multiple long-term trends in the U.S. and global economy. And its recent slip sets up a better entry point.
(Disclosure: Ben Rains owns ACA in the Zacks Alternative Energy Innovators service)
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Why This Under-the-Radar Renewable Energy Stock is a 'Strong Buy'
Arcosa, Inc. (ACA - Free Report) is not a solar name or a true pure-play renewable energy stock. Instead, the infrastructure products and solutions firm is benefitting from multiple megatrends including renewable energy, electrification, telecom expansion, nationwide infrastructure spending, and more.
ACA provided fantastic guidance in late April that’s helped send the stock to fresh highs. Even though Arcosa stock has climbed by 55% in the last year and crushed the market since ACA’s debut in late 2018, its valuation is far from overheated and Arcosa still sits solidly below its current average Zacks price target.
U.S. Infrastructure Spending Boom
Arcosa provides infrastructure-related products and solutions across construction, engineered structures, and transportation markets. Arcosa is benefitting from megatrends such as aging infrastructure, as well as the “continued shift to renewable power generation, and the expansion of new transmission, distribution, and telecommunications infrastructure.”
Arcosa’s growth has been solid since it spun off from Trinity Industries in late 2018. ACA crushed Zacks Q1 earnings estimate in late April and provided hugely upbeat guidance. ACA’s fiscal 2023 consensus estimate has surged by 44% since its report, with FY24’s figure 38% higher. ACA’s bottom-line positivity helps it grab a Zacks Rank #1 (Strong Buy) right now.
Image Source: Zacks Investment Research
Arcosa’s engineered structures division includes utility structures, telecom structures, wind towers, and beyond. ACA’s wind tower business is booming, having landed wind tower orders worth over $1.1 billion that extend into 2028 since the passage of the Inflation Reduction Act (August 2022).
ACA is benefitting directly from the $1 trillion U.S. Infrastructure Bill and the $370 billion Inflation Reduction Act, which Arcosa executives expect will create multi-year tailwinds for many of its businesses.
The gusts at Arcosa’s back include grid-hardening, electrification of vehicles, connecting renewable energy to the grid, the wireless 5G telecom buildout, and more. Arcosa is building out a new manufacturing facility in New Mexico to support its wind industry growth, particularly in the Southwest.
Image Source: Zacks Investment Research
Other Fundamentals
Zacks estimates call for Arcosa’s adjusted 2023 earnings to surge by 27% and then jump another 18% higher in 2024 to reach $3.26 per share. ACA has topped our EPS estimates by an average of 60% in the trailing four quarters, including a 112% beat in Q1.
The company’s revenue is projected to come in roughly flat YoY in 2023. ACA divested its storage tanks business in October 2022. Once the comparisons are smoothed out, Zacks calls for Arcosa to post 10% revenue growth in 2024 to reach $2.46 billion.
Image Source: Zacks Investment Research
Arcosa shares surged following its late-April release and it has hit multiple new highs over the last month-plus. ACA is up 32% YTD and 55% in the last year to crush the S&P 500’s 21% run and its highly-ranked Zacks industry’s 38%. ACA stock has climbed 160% since it began trading in late 2018 to blow away the S&P 500’s 64% and its industry’s 82%.
ACA is cooling off a bit recently, having recently slipped out of overbought RSI territory to closer to neutral. Arcosa still trades far above its 50-day moving average, and ACA sits 13% below its average Zacks price target.
Despite Arcosa’s market and industry-topping performance over the last 12 months and five years, ACA is trading at a 30% discount to its own highs at 24.1X forward 12-month earnings.
Image Source: Zacks Investment Research
Bottom Line
The $3.5 billion market cap firm with an average trading volume of around 215K is gaining more positive attention from Wall Street, according to Zacks brokerage recommendations. Arcosa pays a very small dividend at the moment, but it has plenty of room to slowly raise the payout going forward.
Overall, Arcosa appears to be a somewhat under-the-radar and strong way to gain exposure to multiple long-term trends in the U.S. and global economy. And its recent slip sets up a better entry point.
(Disclosure: Ben Rains owns ACA in the Zacks Alternative Energy Innovators service)