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Arcosa (ACA) Buys Ameron, Expands Infrastructure Portfolio

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Arcosa, Inc. (ACA - Free Report) , a prominent provider of infrastructure solutions, has finalized the acquisition of Ameron Pole Products LLC from NOV Inc. (NOV - Free Report) for $180 million. Ameron's acquisition enhances Arcosa's product offerings in traffic and telecom structures, marking the company's entry into the concrete and steel lighting pole market.

Buyout Synergies

Ameron, established in 1970, specializes in manufacturing concrete and steel poles for various infrastructure applications. With four strategically located manufacturing facilities across the United States, Ameron recorded revenues of approximately $94 million in 2023.

Apart from boosting Arcosa's product offerings in traffic and telecom structures, this Ameron addition accelerates the company’s long-term growth trajectory, particularly in its Engineered Structures segment. The acquisition reflects Arcosa's commitment to a disciplined acquisition strategy aimed at strengthening its position in high-growth markets.

The acquisition was financed through a combination of cash reserves and $160 million in borrowings from Arcosa's revolving credit facility. With solid cash flow support, Arcosa remains focused on identifying attractively-priced acquisitions that complement its existing portfolio and bolster its presence in key markets.

Arcosa plans to update its full-year 2024 revenue and adjusted EBITDA guidance in conjunction with the release of its first-quarter results. This acquisition is expected to play a significant role in shaping Arcosa's financial outlook for the year ahead, further solidifying its position as a leading provider of infrastructure-related products and solutions.

In conclusion, Arcosa's acquisition of Ameron represents a strategic expansion of its infrastructure portfolio, positioning the company for sustained growth in key markets. With a focus on disciplined acquisition strategies and supported by strong cash flow, Arcosa continues to reinforce its market leadership and drive value for its stakeholders.

Acquisitions: A Growth Driver

Arcosa strategically pursued several acquisitions in 2023, significantly bolstering its Construction Products segment. Noteworthy among these acquisitions was the purchase of certain assets and liabilities of Lake Point Holdings, LLC and Lake Point Restoration LLC, Florida-based natural aggregates businesses, in December 2023, for a total of $65 million. This acquisition augmented Arcosa's asset base with $10.4 million in property, plant, and equipment, $22.8 million in mineral reserves, $13.1 million in permits, and $14.2 million in goodwill.

In October 2023, Arcosa expanded its presence in the recycled aggregates market with acquisitions in Florida and Arizona, adding to its Construction Products segment. Additionally, in September 2023, the company acquired a stabilized sand producer in Houston, TX, further diversifying its portfolio and strengthening its regional footprint.

Furthermore, in March 2023, Arcosa's strategic initiatives included the stock acquisition of a Houston-based shoring, trench, and excavation products business. In February 2023, it acquired certain assets and liabilities of a Phoenix, AZ-based recycled aggregates business in its Construction Products segment. These acquisitions collectively contributed to Arcosa's growth trajectory, enhancing its product offerings and market reach within the construction industry.

The 2023 acquisitions align with Arcosa's long-term growth strategy, aiming to capitalize on opportunities in key markets and sectors. As the company continues to integrate these acquisitions, it anticipates further synergies and operational efficiencies, driving value for shareholders.

In a nutshell, Arcosa's strategic acquisitions in 2023 have positioned the company for sustained growth and market leadership in the construction products sector, underscoring its commitment to delivering innovative solutions and creating value for stakeholders.

Zacks Investment Research
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Shares of Arcosa have rallied 37.9% in the past year compared with the Zacks Building Products – Miscellaneous industry's 67.4% rise. Although shares have lagged behind the industry’s performance over the time frame, contributions from its Construction Products and Transportation Products segments, along with a solid backlog level, will drive growth. A boost in infrastructural and public construction spending, along with a renewable energy drive, should improve Arcosa’s growth.

At the end of the fourth quarter of 2023, the combined backlog for utility, wind and related structures was $1,367.5 million, up from $696.2 million at the fourth quarter of 2022-end. The company expects to deliver approximately 43% of its current backlog in 2024.


Zacks Rank & Key Picks

Arcosa currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Construction sector are:

Willdan Group, Inc. (WLDN - Free Report) currently sports a Zacks Rank #1 (Strong Buy). WLDN delivered a trailing four-quarter average earnings surprise of a whopping 886.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of WLDN have gained 31% YTD. The Zacks Consensus Estimate for WLDN’s 2024 sales and earnings per share (EPS) indicates growth of 3.9% and 3.4%, respectively, from the year-ago levels.

Sterling Infrastructure, Inc. (STRL - Free Report) presently sports a Zacks Rank #1. Sterling Infrastructure has a trailing four-quarter earnings surprise of 20.4%, on average. Shares of STRL have gained 20.6% YTD.

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.

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