On Wednesday, Goldman Sachs (NYSE:GS) maintained a Neutral stance on Core & Main Inc. (NYSE:CNM) with a consistent price target of $57.00. The firm recognized the company's strong performance in the third quarter of 2024, noting that the adjusted EBITDA of $277 million exceeded the Visible Alpha Consensus Data by 6%.
The positive results were attributed to sales that surpassed expectations by 4%, bolstered by mergers and acquisitions activities contributing a 9% increase, along with a roughly 4% rise in volumes. These factors helped offset a slight decrease in pricing, which Goldman Sachs believes was around a 1.5% drop, aligning with their projections.
Core & Main's gross margins stood at 26.6%, matching consensus predictions, while their EBITDA margins reached 13.6%, surpassing expectations. In response to these robust third-quarter outcomes, Core & Main has revised its full-year 2024 EBITDA forecast to a range of $915 million to $935 million, up from the previous projection of $900 million to $930 million. Goldman Sachs views this updated guidance as reasonable, particularly in light of recent acquisitions within the quarter and the strong third-quarter performance.
Looking ahead to the fiscal year 2025, Core & Main's management has outlined a strategy to achieve 2-4% growth above the market, with approximately 2% of this growth stemming from current mergers and acquisitions. In addition, they anticipate an expansion in EBITDA margins by 30-50 basis points. According to Goldman Sachs' calculations, this could imply an EBITDA in the range of approximately $950 million to $1,020 million for fiscal year 2025, with their own estimate sitting at $975 million.
The $57 price target set by Goldman Sachs for Core & Main translates to an estimated free cash flow yield of roughly 6.0% for the fiscal year ending in January 2026. This target reflects the investment firm's expectations based on Core & Main's financial projections and market performance.
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