Nucor earnings beat by $0.08, revenue fell short of estimates
On Friday, Lake Street Capital Markets analyst Rob Brown upgraded shares of Argan (NYSE:AGX) from Hold to Buy, citing a recent decline in share price coupled with the company’s strong fourth-quarter performance. According to InvestingPro data, the stock has fallen significantly over the past three months, while maintaining impressive revenue growth of 52.8% over the last twelve months. Argan’s impressive quarter was characterized by its ability to achieve higher gross margins and EBITDA, particularly within its Power segment.
The Power segment’s gross margins reached 21.3%, with an annualized EBITDA surpassing $120 million. According to Brown’s analysis, these results reveal the potential of Argan’s business model. The improved margins were partly due to successful project completion and favorable project close-outs. Brown anticipates that an increasing number of Power projects will lead to a significant improvement in the company’s margins. InvestingPro analysis shows the company maintains a strong financial health score of 3.08 (rated as "GREAT"), with analysts expecting both sales and net income growth this year.
Management’s optimistic outlook on the future project pipeline was another factor influencing the upgrade. They expect to secure several new power plant projects in the next six months, potentially boosting the company’s backlog from $1.4 billion to between $2.5 billion and $3 billion.
Despite the recent drop from its highs, Argan’s stock is currently trading at 8.4 times EV/EBITDA based on Lake Street’s 2028 estimates. According to InvestingPro, the stock currently trades at a P/E ratio of 24x with a notably low PEG ratio of 0.25, suggesting potential undervaluation relative to its growth prospects. Brown believes that this valuation does not fully account for the company’s growth prospects, which are bolstered by the need to replace aging infrastructure and the demand for power from data centers, electric vehicles, and increased domestic manufacturing. InvestingPro subscribers can access 12 additional key insights about Argan’s valuation and growth potential through the platform’s comprehensive analysis tools.
Lake Street’s revised outlook for Argan includes an increase in forward estimates, reflecting confidence in the company’s ability to maintain strong margins and capitalize on the expanding project pipeline.
In other recent news, Argan Inc. reported impressive financial results for the fourth quarter of fiscal year 2025, surpassing earnings and revenue forecasts. The company achieved earnings per share of $2.22, significantly higher than the projected $1.15, and recorded revenue of $232.5 million, exceeding the expected $197.5 million. This marks a 41% increase in revenue year-over-year, highlighting Argan’s strong performance and growth trajectory. The project backlog also saw an 80% increase, reaching $1.4 billion, indicating robust future demand. Analysts have noted the company’s solid execution and favorable project mix, contributing to the substantial earnings beat. Argan’s diversified project portfolio, which includes both natural gas and renewable energy sectors, has been a key factor in its success. Additionally, the company has emphasized its readiness to meet the increasing power demand driven by data centers and electric vehicle adoption. These developments reflect Argan’s strategic positioning and operational efficiency in the energy sector.
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