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Loop Capital maintained its Buy rating and $64.00 price target for Core & Main Inc. (NYSE:CNM). The firm's assessment is that Core & Main's second-quarter 2024 earnings will likely align with market expectations, drawing from insights into Wholesale Management Systems (WMS) and recent industry evaluations. The company's performance was bolstered by a favorable mix of projects and geographic locations.
Notably, WMS experienced its most robust year-over-year growth in nonresidential sectors in the past nine quarters, and new residential lot development continued to show strength during the June quarter.
Despite some competitive pricing in certain markets and projects, the pressure is not as widespread as investors had anticipated. Consequently, Loop Capital anticipates that Core & Main will meet the lower end of its projected gross margin guidance, which forecasts a sequential decline of 30 to 50 basis points for the second quarter of 2024.
However, the firm acknowledges the potential for a more cautious outlook for the second half of 2024. This caution is due to a recent slowdown in end-market demand, evidenced by a decrease in single-family housing starts, inconsistent commercial demand, and concerns about delays in municipal projects funded by the Infrastructure Investment and Jobs Act (IIJA), as suggested by recent subdued infrastructure data.
Despite the possibility of a more guarded forecast for the latter part of the year, Loop Capital's stance on Core & Main remains positive. The firm's recommendation reflects an optimistic view of the stock's potential to rebound after a decline earlier in the year.
In other recent news, Core & Main Inc. has finalized its acquisition of HM Pipe Products, a Canadian distributor of water and wastewater products, marking its expansion into the Canadian market.
The company has also signed a definitive agreement to acquire the assets of GroGreen Solutions Georgia, LLC, furthering its presence in the Southeast. Core & Main has reported a strong first-quarter performance with an 11% increase in net sales to a record $1.74 billion, prompting an upward revision in its annual outlook for net sales and adjusted EBITDA.
In addition, Core & Main has announced a share repurchase program authorizing a buyback of up to $500 million of its Class A common stock. Analyst coverage from Truist Securities revised its price target for Core & Main from $56.00 to $50.00, maintaining a Hold rating, while RBC Capital Markets maintained its Outperform rating with a consistent price target of $60.00.
The company has also seen changes in its leadership, with Mike Huebert joining as president overseeing the fire protection product line and other high growth areas. Lastly, Core & Main shareholders recently elected directors, approved executive compensation, and ratified the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the fiscal year ending February 2, 2025.
InvestingPro Insights
As investors consider Loop Capital's positive stance on Core & Main Inc. (NYSE:CNM), current metrics from InvestingPro provide a valuable perspective on the company's financial health and market performance. With a market capitalization of $9.73 billion, Core & Main is trading at a P/E ratio of 22.78, which may signal investor confidence in the company's earnings potential. However, the P/E ratio adjusted for the last twelve months as of Q1 2025 is slightly higher at 24.31, suggesting that investors are paying a premium for future earnings growth.
Two InvestingPro Tips that are particularly relevant to the article's context include the fact that management has been aggressively buying back shares, which could indicate a belief in the company's value and future prospects. Additionally, analysts predict the company will be profitable this year, aligning with Loop Capital's positive outlook. With these insights in mind, Core & Main's financial strength, marked by a robust gross profit margin of 26.89% in the last twelve months as of Q1 2025, further substantiates the optimistic view. For those seeking more in-depth analysis, InvestingPro offers additional tips on Core & Main at InvestingPro Core & Main.
Despite recent price volatility, with a one-week total return of -8.68%, Core & Main has demonstrated a strong one-year price total return of 46.21%, indicating resilience and potential for recovery. This performance, coupled with the fact that the current price is at 77.68% of the 52-week high, may offer an attractive entry point for investors. Moreover, the company's liquid assets exceed short-term obligations, providing a cushion against market fluctuations and further reinforcing the buy rating from Loop Capital.
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