Why US Concrete Is A Stephens 'Top Idea'

Stephens recently issued a Research Brief on US Concrete Inc USCR after a visit with company management highlighted several key catalysts that could drive US Concrete's stock price higher. Stephens reiterated US Concrete as Overweight with a $70 price target.

Analysts Trey Grooms, Blake Hirschman, and Drew Lipke wrote, "USCR's concentrated market positions in attractive geographies should drive accelerated earnings growth. We continue to believe that investors do not fully appreciate the niche USCR has carved out and continue to paint USCR as "just a concrete company." USCR's consistent sequential price increases and expanding EBITDA margins are evidence of the defensible market positioning and should drive continued beat and raise quarters through 2016. USCR remains our top pick for 2016."

Stephens had two key takeaways from their meeting with US Concrete's senior management:

1. The importance of market structure

Stephens believes that U.S. Concrete has done a great job in taking control of key markets which makes the barriers to entry for competitors increasingly higher. The four key markets for the company are San Francisco, Dallas, New York and Washington D.C. and analysts have seen the ability for U.S. Concrete to increase margins and buying power due to having control of those regional areas.

2. Increasing consumer demand

Stephens noted that U.S. Concrete had over four million cubic yards of concrete in backlog (approximately six months of visibility). Furthermore, in areas such as New York and Washington D.C. the company has seen acceleration in demand due to increasing infrastructure, particularly residential homes and condominiums.