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Investing.com -- Wall Street analysts have begun coverage of Amrize, the newly spun-off North American business from Holcim (SIX:HOLN), with Morgan Stanley (NYSE:MS) and RBC Capital Markets analysts taking a bullish view on the newly created building materials firm.
The company’s shares jumped more than 5% in European trading on Tuesday to CHF41.35. This comes after the stock ended 15% below the reference price on Monday, closing at CHF39.31.
Both firms initiated coverage shortly after the spin-off, which saw Holcim shed approximately 40% of its revenues and EBITDA to create a dedicated platform for North American expansion.
Morgan Stanley initiated the stock with an Overweight rating and a $62 price target, citing a strong earnings outlook, margin expansion potential, and a healthy balance sheet.
“Amrize is a 100% North American Building Materials business,” the bank said in a note, with revenue divided across cement, aggregates/concrete, and building envelope segments.
It sees base-case revenue and EBITDA growth of 7% and 9% CAGR to 2030, respectively, with upside from M&A.
RBC Capital Markets also launched coverage with an Outperform rating and a $61 target. “Amrize is the biggest North American Building Materials pure-play and its largest cement producer,” analysts led by Anthony Codling wrote.
They argue the North American cement market is misunderstood and expect the valuation gap with aggregates to narrow.
RBC estimates fiscal 2025 (FY25) revenue and EBITDA at $11.8 billion and $3.2 billion, respectively, and values Amrize on an 11.5x EV/EBITDA multiple and 5.5% free cash flow yield.
Both banks highlight Amrize’s strong position in cement, with Morgan Stanley noting it has “nearly double the capacity of the number 2 player” in the U.S., and see potential for steady price increases in both cement and aggregates.
In the roofing segment, which has grown rapidly through acquisitions, margins are still below peers but improving. According to Morgan Stanley, “management’s ambition is to lift margins towards Carlisle (~30%) over the mid term through cost control and system selling.”
On capital allocation, both firms point to Amrize’s high cash conversion and flexibility to pursue further M&A.
RBC expects a dividend payout ratio of 30% and share buybacks at around $300 million annually, but sees most of the free cash flow going toward debt reduction and acquisitions.