Construction Partners: Baird Sees Long-Term Investment Opportunity In Contractor's Stock

Shares of Construction Partners Inc (NASDAQ: ROAD) began trading on the Nasdaq May 4. The company recently announced it will release its fiscal second-quarter results June 4. 

The Analyst

Baird Equity Research's Andrew Wittmann initiated coverage of Construction Partners at Outperform with a price target of $15.

The Thesis

Construction Partners is an infrastructure pure play with a steady business that comes from exposure to predictable maintenance-related state and local transportation spending budgets, the analyst said in the Tuesday initiation note.

Baird expects 5-7-percent organic revenue growth combined with modest margin expansion and mid-teens EPS growth. In the initiation note, Wittmann named the following reasons why the stock represents a long-term investment opportunity: 

• Relatively predictable returns, as the company generates around 70 percent of its revenue from the public sector. 
• Construction Partners' risks do not typically include large project cost overruns or a dependence on multiple permits for construction starts, because it primarily competes against local, family-owned companies on projects with an average size of $1.7 million. 
• The company targets markets with relatively less competition and is generally better capitalized than the competition. 
• Acquisitions complement Construction Partners' organic strategy, Wittmann said. It has an identifiable pipeline of relationship-sourced acquisition opportunities and a management team with nearly 40 years of local market experience.

The Price Action

Construction Partners was trading lower by 1.3 percent at the time of publication Tuesday afternoon. 

Related Links:

Benzinga's Top Upgrades, Downgrades For May 29, 2018

Construction Partners, Inc. Announces Fiscal 2018 Second Quarter Earnings Release and Conference Call Schedule