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The company is benefiting from solid contributions from Allied Products, Infiltrator and the residential end markets. Also, its focus on strategic partnerships and product innovations bodes well.
The company believes that investments in partnerships, material science, product innovation, and manufacturing technology will continue to strengthen its position as the leading water management solutions provider.
Earnings estimates for the fiscal 2024 have increased to $6.19 per share from $5.65 in the past 60 days, depicting analysts’ optimism over the stock's growth potential.
Image Source: Zacks Investment Research
Let’s discuss the factors substantiating its Zacks Rank #1 (Strong Buy).
Major Growth Drivers
Solid Performance: During the third quarter of fiscal 2024, the company witnessed volume growth at ADS and Infiltrator, primarily driven by infrastructure, residential and agricultural end markets. Infrastructure sales surged 22% year over year, fueled by demand at the local funding level, as IIJA funds began flowing. The company observed significant activity, including spending on roads, highways, airports and rail projects. Residential market sales also increased by 5% year over year, driven by 17% growth in Infiltrator.
During the said quarter, the company’s net sales increased 1.1% year over year to $662.4 million. Domestic Pipe sales rose 5.2%, Domestic Allied Products & Other sales gained 5.9% and Infiltrator sales increased 16.8% during the quarter. These upsides were driven by growth in the U.S. residential and infrastructure construction end markets. International sales increased 4.4% year over year to $56 million. Notably, adjusted EBITDA rose 20.3% year over year. These pricing actions have been more than offsetting its raw material costs.
Strategic Partnerships: ADS has been focusing on strategic partnerships to enhance its offerings. Recently, the company unveiled a new collaboration with Rainwater Management Solutions, a provider of rainwater harvesting systems. This partnership aims to deliver leading stormwater treatment systems in both commercial and residential markets. Additionally, Infiltrator launched the ECOPOD-NX, an advanced solution for on-site septic wastewater management.
Strong Liquidity: As of Dec 31, 2023, ADS had $1.05 billion in liquidity, including $560.7 million in cash and cash equivalents, along with a $588.9 million committed credit facility. At December end, net cash provided by operating activities was $700.3 million compared with $660.4 million in the prior-year period. Free cash flow (non-GAAP) was $563.9 million versus $533.6 million a year ago. Net debt (total debt and finance lease obligations net of cash) was $764.1 million as of Dec 31, 2023, a decline of $343.7 million from Mar 31, 2023 levels.
Higher ROE: WMS’ trailing 12-month ROE is indicative of growth potential. ROE for the trailing 12 months is 49.8%, much higher than the industry’s 17.1%, reflecting the company’s efficient usage of shareholders’ funds.
Other Key Picks
Here are some other top-ranked stocks from the Construction sector.
VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 31% in the past six months. The Zacks Consensus Estimate for VMC’s 2024 sales and earnings per share (EPS) indicates an improvement of 1.3% and 19.7%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have increased 46.9% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank #2 (Buy). NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 33.1% in the past six months.
The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.
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Advanced Drainage (WMS) Stock Up 113% in a Year: Here's Why
Advanced Drainage Systems, Inc. (WMS - Free Report) or ADS surged 113.4% in the past year compared with the Zacks Building Products - Miscellaneous industry's 67% growth.
The company is benefiting from solid contributions from Allied Products, Infiltrator and the residential end markets. Also, its focus on strategic partnerships and product innovations bodes well.
The company believes that investments in partnerships, material science, product innovation, and manufacturing technology will continue to strengthen its position as the leading water management solutions provider.
Earnings estimates for the fiscal 2024 have increased to $6.19 per share from $5.65 in the past 60 days, depicting analysts’ optimism over the stock's growth potential.
Image Source: Zacks Investment Research
Let’s discuss the factors substantiating its Zacks Rank #1 (Strong Buy).
Major Growth Drivers
Solid Performance: During the third quarter of fiscal 2024, the company witnessed volume growth at ADS and Infiltrator, primarily driven by infrastructure, residential and agricultural end markets. Infrastructure sales surged 22% year over year, fueled by demand at the local funding level, as IIJA funds began flowing. The company observed significant activity, including spending on roads, highways, airports and rail projects. Residential market sales also increased by 5% year over year, driven by 17% growth in Infiltrator.
During the said quarter, the company’s net sales increased 1.1% year over year to $662.4 million. Domestic Pipe sales rose 5.2%, Domestic Allied Products & Other sales gained 5.9% and Infiltrator sales increased 16.8% during the quarter. These upsides were driven by growth in the U.S. residential and infrastructure construction end markets. International sales increased 4.4% year over year to $56 million. Notably, adjusted EBITDA rose 20.3% year over year. These pricing actions have been more than offsetting its raw material costs.
Strategic Partnerships: ADS has been focusing on strategic partnerships to enhance its offerings. Recently, the company unveiled a new collaboration with Rainwater Management Solutions, a provider of rainwater harvesting systems. This partnership aims to deliver leading stormwater treatment systems in both commercial and residential markets. Additionally, Infiltrator launched the ECOPOD-NX, an advanced solution for on-site septic wastewater management.
Strong Liquidity: As of Dec 31, 2023, ADS had $1.05 billion in liquidity, including $560.7 million in cash and cash equivalents, along with a $588.9 million committed credit facility. At December end, net cash provided by operating activities was $700.3 million compared with $660.4 million in the prior-year period. Free cash flow (non-GAAP) was $563.9 million versus $533.6 million a year ago. Net debt (total debt and finance lease obligations net of cash) was $764.1 million as of Dec 31, 2023, a decline of $343.7 million from Mar 31, 2023 levels.
Higher ROE: WMS’ trailing 12-month ROE is indicative of growth potential. ROE for the trailing 12 months is 49.8%, much higher than the industry’s 17.1%, reflecting the company’s efficient usage of shareholders’ funds.
Other Key Picks
Here are some other top-ranked stocks from the Construction sector.
Vulcan Materials Company (VMC - Free Report) currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
VMC delivered a trailing four-quarter earnings surprise of 19.5%, on average. The stock has gained 31% in the past six months. The Zacks Consensus Estimate for VMC’s 2024 sales and earnings per share (EPS) indicates an improvement of 1.3% and 19.7%, respectively, from a year ago.
Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have increased 46.9% in the past six months.
The Zacks Consensus Estimate for STRL’s 2024 sales and EPS indicates a rise of 11.7% and 11.4%, respectively, from the prior-year levels.
NVR, Inc. (NVR - Free Report) currently sports a Zacks Rank #2 (Buy). NVR delivered a trailing four-quarter earnings surprise of 8.1%, on average. The stock has gained 33.1% in the past six months.
The Zacks Consensus Estimate for NVR’s 2024 sales and EPS indicates growth of 7.7% and 4.6%, respectively, from the prior-year levels.