GICS Sector : Industrials
Arcosa, Inc., together with its subsidiaries, provides infrastructure-related products and solutions for the construction, energy, and transportation markets in North America.It operates through three segments: Construction Products, Engineered Structures, and Transportation Products.The Construction Products segment offers natural and recycled aggregates; specialty materials; and trench shields and shoring products for residential and non-residential construction, agriculture, specialty building products, as well as for infrastructure related projects.
Arcosa's third-quarter 2025 results were impressive, with revenue increasing 27% to a record level and adjusted EBITDA growing 51%, excluding the divested steel components business. The company's adjusted EBITDA margin was 21.8%, a significant 340 basis points improvement over the same period last year. Earnings per share (EPS) came in at $1.56, beating estimates of $1.33. The strong performance was driven by the $1.2 billion Stavola acquisition, closed a year ago, which contributed significantly to the growth. The company's financial performance was characterized by strong revenue growth, margin expansion, and a beat on EPS estimates.
Publication Date: Nov -16
The Construction Products segment delivered a record quarterly performance, with adjusted segment EBITDA of $150 million and a 300 basis point margin expansion. The Engineered Structures segment saw a 29% increase in adjusted EBITDA and a 240 basis point margin expansion. The barge business generated double-digit revenue and adjusted EBITDA growth, with a 190 basis point margin increase. The strong segment performance was driven by pricing growth, operating improvements, and strong demand.
Arcosa ended the quarter with a leverage ratio of 2.4x, ahead of its stated plan to return to a 2 to 2.5x leverage target within 18 months of the Stavola acquisition. The company generated $161 million in operating cash flow and $134 million in free cash flow during the quarter, allocating $100 million to reduce the outstanding balance on the Stavola acquisition term loan. The company's liquidity remains strong at $920 million.
For the full year 2025, Arcosa adjusted its guidance ranges, tightening forecasted revenues to $2.86 billion to $2.91 billion and adjusted EBITDA to $575 million to $585 million, implying 32% adjusted EBITDA growth. The company expects high single-digit pricing growth in aggregates and high single-digit volume growth for the full year. The outlook for the Engineered Structures segment remains positive, driven by the growth in the U.S. power industry and investments in transmission and distribution infrastructure.
Arcosa's current valuation metrics indicate a P/E Ratio of 33.07, EV/EBITDA of 11.61, and a Free Cash Flow Yield of 6.38%. These metrics suggest that the company's strong growth prospects are partially priced in, but the cash flow yield remains attractive. Analysts estimate next year's revenue growth at 6.0%, which may not be sufficient to justify the current P/E multiple, but the company's improving profitability and cash generation capabilities support the valuation.
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Arcosa's Construction Products segment growth is driven by increasing infrastructure spending, strong demand for aggregates, and growing adoption of recycled materials. Additionally, the company's strategic acquisitions, expanded product offerings, and operational efficiencies contribute to its 8% growth rate.
Arcosa's Engineered Structures segment growth is driven by increasing demand for wind turbine foundations, expansion in the utility and telecom markets, and strategic acquisitions. Additionally, growing investments in renewable energy and infrastructure development are fueling growth. The company's focus on innovation, operational efficiency, and customer relationships also contribute to its 9% growth rate.
Arcosa's Transportation Products segment growth is driven by increasing demand for railcars and tank containers, supported by a strong North American energy market and growing need for crude oil transportation. Additionally, the company's strategic acquisitions and expansion into new markets, such as Mexico, contribute to its 11% growth rate.
Arcosa, Inc.'s eliminations segment shows 0% growth, driven by stagnant demand in the construction and infrastructure industries, lack of new project awards, and intense competition in the materials and equipment markets, resulting in flat revenue and no eliminations.
Arcosa's inland barges are designed for transporting dry bulk commodities such as grains, coal, and aggregates across inland waterways.
Arcosa's tank barges are designed for transporting liquid cargo such as petroleum products, chemicals, and other hazardous materials.
Arcosa's covered hoppers are designed for transporting dry bulk commodities such as grains, minerals, and other dry goods.
Arcosa's gondola cars are designed for transporting bulk commodities such as coal, aggregates, and other heavy materials.
Arcosa's construction materials include aggregates, ready-mix concrete, and other building materials.
Arcosa's energy equipment includes wind towers, oil and gas equipment, and other energy-related products.
The threat of substitutes for Arcosa, Inc. is medium due to the availability of alternative products and services in the construction materials industry.
The bargaining power of customers for Arcosa, Inc. is low due to the company's strong brand reputation and diversified customer base.
The bargaining power of suppliers for Arcosa, Inc. is medium due to the company's dependence on a few key suppliers for raw materials.
The threat of new entrants for Arcosa, Inc. is low due to the high barriers to entry in the construction materials industry, including significant capital requirements and regulatory hurdles.
The intensity of rivalry for Arcosa, Inc. is high due to the competitive nature of the construction materials industry, with many established players competing for market share.
| Value | |
|---|---|
| Debt Weight | 19.66% |
| Debt Cost | 5.70% |
| Equity Weight | 80.34% |
| Equity Cost | 7.68% |
| WACC | 7.29% |
| Leverage | 24.48% |
Value: 2.6
Growth: 5.8
Quality: 6.7
Yield: 2.0
Momentum: 7.0
Volatility: 9.3
1-Year Total Return ->
Value: 3.4
Growth: 7.3
Quality: 4.8
Yield: 5.0
Momentum: 6.5
Volatility: 5.7
1-Year Total Return ->
Value: 5.8
Growth: 5.9
Quality: 3.5
Yield: 8.0
Momentum: 2.0
Volatility: 6.7
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Value: 2.8
Growth: 6.8
Quality: 7.0
Yield: 0.0
Momentum: 7.0
Volatility: 7.3
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Value: 2.2
Growth: 4.6
Quality: 7.4
Yield: 0.0
Momentum: 3.0
Volatility: 8.0
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Value: 4.1
Growth: 4.9
Quality: 4.1
Yield: 0.0
Momentum: 4.0
Volatility: 6.3
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