On Tuesday, Goldman Sachs initiated coverage on shares of CRH plc (NYSE:CRH) with a Neutral rating and a 12-month price target of $112. The firm highlighted CRH's strong track record of value-enhancing capital deployment, which has been integral to the company's 18% earnings per share (EPS) growth compound annual growth rate (CAGR) over the past decade.
This growth has been largely driven by strategic acquisitions and divestitures. With a current market capitalization of $67.4 billion and a P/E ratio of 19.8, CRH has demonstrated impressive momentum, delivering a 46.5% return year-to-date. According to InvestingPro analysis, which offers 13 additional investment tips for this stock, CRH's management has been aggressively buying back shares while maintaining a consistent dividend growth streak.
CRH has notably expanded its U.S. materials segment, which now represents 54% of its profits, up from 36%. This expansion includes the acquisition of Ash Grove, which was completed at a valuation of less than 5 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) based on current estimates.
The cost of U.S. cement replacement has also increased from $400 to between $800 and $1,000 per ton. The company's current EV/EBITDA ratio stands at 12.4, with a robust EBITDA of $6.5 billion and total revenue of $35.4 billion in the last twelve months.
Goldman Sachs commended CRH for its differentiated mergers and acquisitions (M&A) process and strong operational performance, which has seen the company's total margins increase from approximately 9% to around 20% over the last decade. The firm conducted a thorough analysis of market shares and historical deal processes to support its views.
Despite these positive aspects, Goldman Sachs noted a potential deceleration in growth for U.S. non-residential construction spending, which could impact CRH's performance. This cautionary stance is based on an in-depth examination of 20 leading indicators. The firm is also waiting for a recovery in the residential construction sector.
The analyst's position is influenced by CRH's stock performance, which has seen a 66% increase over the past 12 months, compared to the S&P 500's 32% gain. According to Goldman Sachs, CRH's current valuation aligns with a mix of U.S. and global cement peers, which justifies the Neutral rating.
In other recent news, CRH plc announced a leadership transition with the appointment of Alan Connolly as interim CFO, effective January 1, 2025, coinciding with the current CFO, Jim Mintern, assuming the role of CEO. This follows robust financial performance for Q3 2024, highlighted by total revenues increasing by 4% to $10.5 billion and adjusted EBITDA rising by 12% to $2.5 billion.
The company's earnings per share also saw a 10% growth compared to the previous year, attributed to effective cost management, positive pricing momentum, and strategic acquisitions, including a significant $2.1 billion acquisition in Texas.
CRH also declared a new quarterly dividend of $0.35 per share, marking a 5% annual increase. The company reaffirmed its full-year adjusted EBITDA guidance of $6.87 billion to $6.97 billion, and projected net income between $3.78 billion and $3.85 billion. In a recent development, JPMorgan increased its price target for CRH to $116.00, maintaining its Overweight rating on the stock, based on the company's strong operational performance.
Further developments include Oldcastle Infrastructure, a subsidiary of CRH, expanding its manufacturing capabilities in Northern California through the acquisition of Cook Concrete Products.
This acquisition is expected to enhance Oldcastle Infrastructure's product and service offerings, and strengthen its presence in Northern California, Oregon, and Nevada. Lastly, CRH announced the retirement of Albert Manifold, with Jim Mintern set to take over as CEO.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.