Construction Partners delivered a first quarter that surpassed Wall Street’s expectations, with management crediting robust revenue growth to both organic expansion and recent acquisitions. CEO Jule Smith emphasized the company’s success in scaling operations across nearly 100 local markets and highlighted the seamless integration of new platform companies, particularly in Texas and Tennessee. The company’s vertical integration strategy, including aggregates and asphalt terminals, contributed to higher margins, while demand in Sunbelt states remained steady. Management noted that healthy state and federal infrastructure funding, combined with ongoing population migration to the region, continued to support elevated project activity and a record backlog.
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Construction Partners (ROAD) Q1 CY2025 Highlights:
- Revenue: $571.7 million vs analyst estimates of $559.9 million (53.9% year-on-year growth, 2.1% beat)
- Adjusted EPS: $0.08 vs analyst estimates of -$0.06 (significant beat)
- Adjusted EBITDA: $69.27 million vs analyst estimates of $53.75 million (12.1% margin, 28.9% beat)
- The company lifted its revenue guidance for the full year to $2.8 billion at the midpoint from $2.7 billion, a 3.7% increase
- EBITDA guidance for the full year is $420 million at the midpoint, above analyst estimates of $386.6 million
- Operating Margin: 4.8%, up from 0.8% in the same quarter last year
- Backlog: $2.84 billion at quarter end
- Market Capitalization: $5.95 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Construction Partners’s Q1 Earnings Call
- Kathryn Thompson (Thompson Research Group) asked about potential project delays amid macro uncertainty. CEO Jule Smith replied that the company is experiencing “business as usual” with no meaningful delays or cancellations in their local markets.
- Tyler Brown (Raymond James) questioned the unique margin profile and business model of the PRI acquisition. Smith and CFO Greg Hoffman explained that PRI’s expertise in pavement preservation and its established management team provide opportunities for margin expansion and future bolt-ons.
- Adam Thalhimer (Thompson Davis) inquired about exposure to tariffs and inflation. Smith stated that almost all supply chain inputs are sourced domestically, so tariffs have “not been a real factor so far” and any cost increases would be passed through to customers.
- Michael Feniger (Bank of America) asked whether organic growth reflects market share gains or underlying market strength. Hoffman explained that acquisitions fuel new organic growth, but core Sunbelt markets also remain robust with strong bidding activity.
- Andy Wittmann (Robert W. Baird) sought details on backlog margin quality and vertical integration progress. Smith highlighted that backlog margins remain healthy and that vertical integration, including additional services, is advancing both through acquisitions and organic investments.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace and effectiveness of further acquisitions and their integration into existing operations, (2) the sustainability of strong backlog levels as the company enters peak construction season, and (3) the impact of ongoing federal and state infrastructure funding on bidding activity and project awards. Execution on vertical integration and organic service line expansion will also be important indicators of performance.
Construction Partners currently trades at $105.35, up from $92.57 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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