Tuesday - Oppenheimer has increased the price target for Arcosa (NYSE: NYSE:ACA) shares to $110 from the previous $105, while maintaining an Outperform rating on the company's shares.
With a market capitalization of $4.5 billion and strong revenue growth of 11.7% over the last twelve months, the adjustment comes as the firm acknowledges the company's strong fundamentals and management's positive outlook. According to InvestingPro analysis, Arcosa currently trades above its Fair Value, though analysts maintain bullish targets ranging from $105 to $145.
Analysts at Oppenheimer have noted the company's enthusiasm about its business fundamentals, including the potential for further portfolio optimization. InvestingPro data shows the company operates with moderate debt levels and maintains strong liquidity, with a current ratio of 3.6x.
Arcosa's barge orders have been accelerating, supported by moderating steel prices and the necessity to replace an aging fleet. Consequently, the estimated EBITDA for the Barge segment in 2025 is now approximately $55 million, a significant rise from $35 million two years prior, and approaching the mid-cycle estimate of around $75 million.
The management at Arcosa has expressed confidence in the Barge business's performance, indicating the possibility of divestiture at a future date when EBITDA increases and the business is expected to generate roughly $70 million in cash flow over the next twelve months. In the Wind Towers division, Arcosa continues to fulfill a substantial backlog of orders, which are secured by take-or-pay agreements, and anticipates another large order set for delivery in 2026.
The analysts also suggested that Arcosa could potentially monetize the Wind Towers business, especially if the Inflation Reduction Act (IRA) remains largely unchanged. The decision to raise the price target to $110 is based on higher earnings estimates and increased confidence in the company's performance.
In other recent news, Arcosa, Inc. reported a robust growth in its third quarter of 2024, with consolidated revenues increasing by 14% and adjusted EBITDA rising by 39%. These results come in the wake of strategic transformations, including the divestiture of its steel components business and the acquisition of Stavola, which have enhanced Arcosa's market position.
The company has adjusted its full-year capital expenditure guidance and raised its revenue and adjusted EBITDA guidance for 2024, reflecting its strong year-to-date performance and strategic acquisitions.
The Engineered Structures segment saw a 26% revenue growth, driven by higher wind tower volumes and the Ameron acquisition. However, the Construction Products segment experienced flat revenues due to a decline in freight revenues and a divestiture. The company is fully booked for tank barges in 2025 and anticipates low double-digit price increases through 2024.
The company's management emphasized a strategic focus on margins over volume for the current year and expects small acquisitions made in 2023 to enhance margins. The integration of the Stavola acquisition is progressing smoothly, with synergies and operational improvements anticipated. These are recent developments that underline Arcosa's strengthened market position and solid trajectory of growth.
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