Why Construction Partners Shares Are Falling Today

  • Construction Partners Inc ROAD reported second-quarter FY22 revenue growth of 35.9% year-over-year to $243.4 million, beating the consensus of $217.66 million.
  • EPS loss widened to $(0.18) from $(0.10) in 2Q21, missing the consensus of $(0.05).
  • The gross margin contracted by 496 bps to 5.1%. The operating loss widened to $(11.49) million from $(6.39) million in 2Q21.  
  • Adjusted EBITDA declined 28.9% Y/Y to $7.82 million, and margin contracted by 293 bps to 3.1%.
  • Construction Partners' net cash provided by operating activities, net of acquisitions, YTD was $3.3 million, compared to $2.4 million a year ago.
  • The company's project backlog was $1.28 billion at March 31, 2022, compared to $1.09 billion at December 31, 2021, and $773.3 million at March 31, 2021.
  • "During the quarter, we experienced an unprecedented inflationary cost environment that negatively impacted profitability, primarily due to the rapid increase in energy costs driven largely by the invasion of Ukraine. We have taken immediate action in response by raising equipment rates used in bids to cover the new market prices of diesel and other fuels, we are incorporating additional contingencies into project bids, and we have begun implementing diesel fuel index mechanisms with customers and suppliers where possible," commented CEO Fred J. (Jule) Smith.
  • FY22 Outlook: Construction Partners expects revenue of $1.15 billion - $1.20 billion (prior expectation $1.075 billion - $1.150 billion) versus the consensus of $1.14 billion.
  • The company expects net income of $14.5 million - $25.3 million (prior $34.7 million - $41.8 million), Adjusted EBITDA of $105.0 million - $120.3 million (prior $122 million - $132 million).
  • The company has updated its FY22 guidance to reflect the strong project demand environment and the continued inflation and elevated energy costs that will persist during the year.
  • Price Action: ROAD shares traded lower by 9.85% at $23.62 on the last check Friday.
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