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On Wednesday, Goldman Sachs adjusted its price target for Core & Main Inc. (NYSE:CNM) shares, reducing it slightly to $56.00 from the previous $57.00 while maintaining a Neutral stock rating. The revision followed Core & Main’s fourth-quarter earnings report for the fiscal year 2024, which aligned with analyst expectations.
Core & Main reported adjusted EBITDA of $179 million for the fourth quarter of 2024, meeting the consensus estimates according to Visible Alpha Consensus Data. The company’s gross margins remained steady sequentially at 26.6% and were perceived as potentially better than anticipated by market observers.
Looking ahead, Core & Main has provided guidance for the fiscal year 2025 that matches Goldman Sachs’ projections, with an expected EBITDA of $975 million. The forecast is based on low single-digit volume growth, a 2% contribution from completed mergers and acquisitions, and stable to slightly improved margins of up to 30 basis points. Notably, gross margins are anticipated to grow both year-over-year and sequentially throughout the year, driven by factors such as enhanced sourcing strategies and increased penetration of private label offerings.
The pricing environment for Core & Main is projected to remain neutral in 2025, with the potential for positive surprises if inflationary trends continue. The first half of 2025 is expected to present the most favorable pricing comparisons, as the company moves past the deflationary challenges faced in the fire protection sector during the first half of 2024.
Goldman Sachs has kept its adjusted EBITDA forecasts for fiscal years 2025 and 2026 unchanged and introduced a new adjusted EBITDA estimate of $1,095 million for fiscal year 2027. Although the firm’s stance on Core & Main’s stock remains Neutral, the analysts suggest that the risk/reward balance could be tilted towards the positive side. The new price target of $56 implies an approximate 6.0% free cash flow yield for the fiscal year 2026.
In other recent news, Core & Main Inc. reported its fourth-quarter 2024 earnings with net sales reaching nearly $1.7 billion, slightly surpassing the forecasted $1.68 billion. However, earnings per share (EPS) fell short, coming in at $0.33 against the anticipated $0.36. The company maintained its gross margins at 26.6% and demonstrated robust cash flow, generating $621 million in operating cash flow. Barclays (LON:BARC) maintained an Overweight rating on Core & Main, with a price target of $65, highlighting the company’s stable gross margin and revenue that slightly exceeded expectations. Additionally, Core & Main’s guidance for fiscal year 2025 projects revenues between $7.6 billion and $7.8 billion, aligning closely with consensus estimates.
JPMorgan also reiterated its Overweight rating on Core & Main with a price target of $54, acknowledging the company’s adjusted EBITDA performance and sales growth that exceeded projections. The firm noted a 17.9% sales growth, with a strong performance in pipes, valves, fittings, and storm drainage products. Despite a slight shortfall in margins, Core & Main’s guidance for adjusted EBITDA between $950 million to $1 billion places JPMorgan’s estimate within the higher range of the company’s forecast. The company also experienced an unexpected management change, with the CFO transitioning to CEO and the SVP of Finance/Investor Relations becoming CFO.
These developments reflect Core & Main’s strategic focus on maintaining growth and expanding its market presence, supported by stable municipal infrastructure investments and ongoing mergers and acquisitions.
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