Barclays, Loop Capital Raise Advanced Drainage Systems Price Target After Q2 Results

Barclays, Loop Capital Raise Advanced Drainage Systems Price Target After Q2 Results
  • Barclays analyst Matthew Bouley raised the price target on Advanced Drainage Systems Inc WMS to $135 (an upside of 8%) from $130 and maintained an Overweight rating on the shares. 
  • Bouley cites stronger pricing dynamics and improving volumes on increased production capacity in Q3 for the target raise. The analyst says A margin recovery is in sight.
  • Loop Capital analyst Garik Shmois raised the price target to $142 from $127 and maintained a Buy rating on the shares. 
  • The company missed on Q2 margins, but this was "to be expected" considering the "steep" transportation inflation, mentions the analyst.
  • Shmois adds that volumes were also muted due to the capacity issues, but pricing was up about 30% y/y, and the price/cost ratio was "positive."
  • Recently, Advanced Drainage Systems reported a Q2 sales increase of 29.8% year-over-year to $706.5 million, missing the consensus of $710.2 million. EPS was $0.88, compared to $0.93 a year ago. Gross profit decreased 2.8%, to $200.1 million.
  • Adjusted EBITDA decreased 5.3% Y/Y to $164.8 million, and margin declined to 23.3% from 32% a year ago.
  • Year-to-date cash provided by operating activities was $94.9 million compared to $286.2 million a year ago, and Free cash flow was $31.1 million.
  • FY22 Outlook: The company expects net sales of $2.550 billion - $2.650 billion (prior view $2.5 billion - $2.6 billion) versus the consensus of $2.56 billion. Adjusted EBITDA outlook is unchanged at $635 million - $665 million.
  • Price Action: WMS shares are trading higher by 3.05% at $124.37 on the last check Friday.

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