Latest news with #Infiltrator
Yahoo
15-05-2025
- Business
- Yahoo
Advanced Drainage (NYSE:WMS) Misses Q1 Sales Targets
Water management company Advanced Drainage Systems (NYSE:WMS) missed Wall Street's revenue expectations in Q1 CY2025, with sales falling 5.8% year on year to $615.8 million. The company's full-year revenue guidance of $2.9 billion at the midpoint came in 7.6% below analysts' estimates. Its non-GAAP profit of $1.03 per share was 6.2% below analysts' consensus estimates. Is now the time to buy Advanced Drainage? Find out in our full research report. Revenue: $615.8 million vs analyst estimates of $660.4 million (5.8% year-on-year decline, 6.8% miss) Adjusted EPS: $1.03 vs analyst expectations of $1.10 (6.2% miss) Adjusted EBITDA: $176.7 million vs analyst estimates of $184.1 million (28.7% margin, 4% miss) Management's revenue guidance for the upcoming financial year 2026 is $2.9 billion at the midpoint, missing analyst estimates by 7.6% and implying -0.1% growth (vs 0.9% in FY2025) EBITDA guidance for the upcoming financial year 2026 is $880 million at the midpoint, below analyst estimates of $937.6 million "demand continues to be impacted by higher interest rates and economic uncertainty. In addition, the fourth quarter had unfavorable winter weather conditions this year against an already difficult comparison of very favorable weather in the prior year" Operating Margin: 19%, down from 20.7% in the same quarter last year Free Cash Flow was -$5.31 million compared to -$29.76 million in the same quarter last year Market Capitalization: $9.44 billion Scott Barbour, President and Chief Executive Officer of ADS, commented, "In Fiscal 2025, domestic construction market sales increased 3% as we continued to drive above market performance through our material conversion strategy in the stormwater and onsite wastewater markets. Importantly, organic sales in our most profitable segments, Infiltrator and Allied Products, increased 4.6% and 2.5%, respectively, and the onsite wastewater and Allied products now represent a collective 44% of revenue. The resiliency demonstrated by this year's 30.6% Adjusted EBITDA margin is due in part to our strategy to grow these more profitable products to be a higher mix of the overall sales." Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE:WMS) provides clean water management solutions to communities across America. A company's long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Advanced Drainage grew its sales at an impressive 11.7% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers. Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Advanced Drainage's recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.8% over the last two years. Advanced Drainage also breaks out the revenue for its most important segments, Pipe and Infiltrators, which are 51.7% and 19.9% of revenue. Over the last two years, Advanced Drainage's Pipe revenue (thermoplastic corrugated pipes) averaged 6.6% year-on-year declines. On the other hand, its Infiltrators revenue (wastewater treatment systems) averaged 10% growth. This quarter, Advanced Drainage missed Wall Street's estimates and reported a rather uninspiring 5.8% year-on-year revenue decline, generating $615.8 million of revenue. Looking ahead, sell-side analysts expect revenue to grow 6.2% over the next 12 months. While this projection implies its newer products and services will catalyze better top-line performance, it is still below average for the sector. Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link. Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It's also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes. Advanced Drainage has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.1%. This result isn't too surprising as its gross margin gives it a favorable starting point. Analyzing the trend in its profitability, Advanced Drainage's operating margin rose by 5.3 percentage points over the last five years, as its sales growth gave it immense operating leverage. In Q1, Advanced Drainage generated an operating profit margin of 19%, down 1.7 percentage points year on year. Since Advanced Drainage's gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses. Revenue trends explain a company's historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions. Advanced Drainage's EPS grew at an astounding 83.9% compounded annual growth rate over the last five years, higher than its 11.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded. We can take a deeper look into Advanced Drainage's earnings to better understand the drivers of its performance. As we mentioned earlier, Advanced Drainage's operating margin declined this quarter but expanded by 5.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals. Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business. For Advanced Drainage, its two-year annual EPS declines of 2.5% mark a reversal from its (seemingly) healthy five-year trend. We hope Advanced Drainage can return to earnings growth in the future. In Q1, Advanced Drainage reported EPS at $1.03, down from $1.23 in the same quarter last year. This print missed analysts' estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Advanced Drainage's full-year EPS of $5.87 to grow 7.7%. We struggled to find many positives in these results. Its Infiltrators revenue missed and its full-year revenue guidance fell short of Wall Street's estimates. Management stated that "demand continues to be impacted by higher interest rates and economic uncertainty. In addition, the fourth quarter had unfavorable winter weather conditions this year against an already difficult comparison of very favorable weather in the prior year". Overall, this was a weaker quarter. The stock remained flat at $120.69 immediately following the results. The latest quarter from Advanced Drainage's wasn't that good. One earnings report doesn't define a company's quality, though, so let's explore whether the stock is a buy at the current price. If you're making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it's free.
Yahoo
07-02-2025
- Business
- Yahoo
Advanced Drainage Systems Inc (WMS) Q3 2025 Earnings Call Highlights: Navigating Growth Amidst ...
Net Sales: Increased 4% to $691 million, including the acquisition of Orenco. Non-Residential Sales: Increased 7%, representing about 45% of total sales. Residential Sales: Increased 9%, accounting for about 35% of total revenue. Infrastructure Sales: Decreased 6% due to a difficult comparison from the previous year. Adjusted EBITDA: Decreased 6% year-over-year to $191 million. Free Cash Flow: Generated $374 million year-to-date, compared to $564 million in the prior year. Capital Spending: Increased 22% year-over-year to $166 million, with a full-year expectation of approximately $225 million. Net Debt-to-Adjusted EBITDA Leverage: 1 time, with $489 million of cash on hand and $590 million of availability under the revolving credit facility. Capital Reinvestment: $416 million reinvested back into the business during the first nine months, compared to $136 million in the prior year. Shareholder Returns: $107 million returned through dividends and share repurchases. Warning! GuruFocus has detected 1 Warning Sign with WMS. Release Date: February 06, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Net sales increased by 4% to $691 million, driven by strong demand in domestic construction markets and the acquisition of Orenco. Sales in the non-residential market rose by 7%, with significant demand in the South and Southeastern United States. The residential market saw a 9% increase in sales, with Infiltrator's organic revenue growing by 6%. Expansion of the ADS recycling facility in Georgia is expected to enhance recycling capacity and service efficiency in the Southeast. The acquisition of Orenco is strategically enhancing the company's product offerings and market position in decentralized wastewater treatment. Adjusted EBITDA decreased by 6% year-over-year to $191 million, impacted by unfavorable price costs. Sales in the infrastructure markets declined by 6% due to a difficult comparison with the previous year. Free cash flow decreased to $374 million year-to-date from $564 million in the prior year. Year-to-date capital spending increased by 22%, impacting cash flow. The company faces tough year-over-year comparisons in the fourth quarter, particularly in the infrastructure and pipe business segments. Q: Can you provide more details on the fourth quarter guidance, particularly the $40 million EBITDA range? A: Scott Cottrill, CFO, explained that the fourth quarter is expected to be similar to last year, which had a tough comparison due to favorable weather conditions. Pricing remains stable, and material costs are flattening out, which supports confidence in meeting the guidance range. Q: What factors contributed to the acceleration in the non-residential market despite a tough comparison? A: Michael Higgins, VP of Corporate Strategy & Investor Relations, noted that the conversion story remains strong, with a focus on the South and Southeast regions. Scott Barbour, CEO, added that Allied Products, particularly new water quality products, contributed to the growth. Q: Are you approaching a neutral price/cost spread in the fourth quarter? A: Scott Cottrill stated that while year-over-year trends continue, sequentially, pricing is stabilizing, and material costs are flattening. This sequential stability is crucial for the company's outlook. Q: How are customer conversations and market outlooks changing compared to three to six months ago? A: Scott Barbour mentioned that customer sentiment remains unsettled, with no significant changes in outlook. The market remains choppy by region, but overall, the sentiment is stable. Q: Can you discuss the competitive and pricing landscape? A: Scott Barbour noted that competitive behavior has been steady for several months, with pricing decisions made to achieve local objectives. There have been no significant changes in competitive dynamics. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Sign in to access your portfolio
