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Advanced Drainage Systems (WMS) Q4 Earnings Beat, Margin Up

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Advanced Drainage Systems, Inc. (WMS - Free Report) reported impressive results for fourth-quarter fiscal 2024. Its earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis.

Shares of this innovative water management solutions provider tumbled 2.1% on May 16 despite outpacing its previously provided guidance for major metrics.

Scott Barbour, president and chief executive officer of WMS, stated, "In Fiscal 2025, we expect to see favorable demand drive volume growth in the residential and infrastructure markets, and stability in the non-residential construction market. Improved fixed cost absorption, increasing contributions from previous capital investments as well as effective management of price/cost should lead to healthy Adjusted EBITDA margins that at least equal Fiscal 2024 levels with potential for margin expansion."

Inside the Headlines

WMS reported adjusted earnings per share (EPS) of $1.23, which topped the Zacks Consensus Estimate of 95 cents by 29.5% and grew 9.8% year over year.
Revenues of $653.8 million topped the consensus mark of $620 million by 5.5% and increased 5.9% year over year. The overall increase in domestic net sales was primarily driven by the continued improvement in the U.S. residential, infrastructure construction and agriculture end markets.

Gross profit increased 13.3% to $252 million due to the favorable volume growth, better fixed cost absorption and productivity from capital investments.

Adjusted EBITDA improved 11.2% year over year to $191.2 million on effective management of price/cost and strong operational execution. Adjusted EBITDA margin expanded 140 basis points (bps) to 29.2%.

Segments Details

Revenues from external customers for the Pipe segment grew 3.3% year over year to $358.7 million.

Infiltrator Water Technologies’ revenues from external customers rose 21% year over year to $106.1 million.

Revenues from external customers from the International segment were up 5.8% from the year-ago figure to $36.4 million.

The Allied Products & Other segment’s revenues from external customers totaled $152.7 million, which gained 2.9% from the year-ago quarter.

Fiscal 2024 Highlights

The company generated net revenues of $2.87 billion, which decreased 6.4% from fiscal 2023 due to lower demand in the U.S. construction and agriculture end markets during the first half of the fiscal year.

Adjusted EPS of $6.39 increased from $6.16 reported in the year-ago period. Adjusted EBITDA increased 2.1% to $922.9 million, and adjusted EBITDA margin came in at 32.1%, up 270 bps from the year-ago period.


As of Mar 31, 2024, the company had total liquidity of $1,079 million, including cash of $490.2 million compared with $217.1 million at the fiscal 2023-end. Long-term debt at March-end was $1.26 billion, in line with the year-ago period.

Net cash provided by operations was $717.9 million in fiscal 2024 compared with $707.8 million in fiscal 2023.

Fiscal 2025 Guidance

Based on current visibility, the backlog of existing orders and business trends, the company expects net sales to be in the range of $2.925-$3.025 billion, up 2%-5% year over year. Adjusted EBITDA is expected to be in the range of $940-$980 million, up 2-6% from the previous year. Adjusted EBITDA margin is anticipated to be between 32.1% and 32.4%, flat to up 30 bps from the year-ago period.

Capital expenditures are likely to be in the range of $250-$300 million.

Zacks Rank & Recent Construction Releases

WMS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Going forward, MLM anticipates record federal-level and state-level infrastructure investments, large-scale heavy industrial activity, data centers, and energy projects to offset softer residential and warehouse construction demand, as well as anticipated moderation in light non-residential activity. Impressively, MLM increased full-year adjusted EBITDA guidance to $2.37 billion at the midpoint.

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The impressive first-quarter performance was primarily propelled by several key factors. Notably, there was a notable surge in demand for Siding and OSB, highlighted by a significant increase in volume.

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