Core Viewpoint - Quanex Building Products (NX) is currently viewed as a more attractive investment option compared to Construction Partners (ROAD) due to its stronger valuation metrics and earnings outlook [3][7]. Valuation Metrics - NX has a forward P/E ratio of 6.35, significantly lower than ROAD's forward P/E of 39.58, indicating that NX is potentially undervalued [5]. - The PEG ratio for NX is 0.45, while ROAD's PEG ratio is 0.99, suggesting that NX offers better value relative to its expected earnings growth [5]. - NX's P/B ratio stands at 0.79, compared to ROAD's P/B of 5.34, further highlighting NX's superior valuation [6]. Earnings Outlook - NX holds a Zacks Rank of 1 (Strong Buy), indicating a positive earnings estimate revision trend, while ROAD has a Zacks Rank of 3 (Hold), suggesting a less favorable earnings outlook [3][7]. - The solid earnings outlook for NX contributes to its classification as the superior value option in the current market [7].

Group 1 - Investors are considering Quanex Building Products (NX) and Construction Partners (ROAD) as potential undervalued stocks in the Building Products - Miscellaneous sector [1] - NX has a Zacks Rank of 1 (Strong Buy), indicating a stronger improvement in earnings outlook compared to ROAD, which has a Zacks Rank of 3 (Hold) [3] - Value investors utilize various traditional metrics to identify undervalued companies, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Group 2 - NX has a forward P/E ratio of 6.52, significantly lower than ROAD's forward P/E of 36.45, indicating better valuation [5] - NX's PEG ratio is 0.47, while ROAD's PEG ratio is 0.92, suggesting NX is expected to grow earnings at a more favorable rate relative to its price [5] - NX has a P/B ratio of 0.81, compared to ROAD's P/B of 4.91, further highlighting NX's undervaluation [6] Group 3 - Based on the valuation metrics, NX holds a Value grade of B, while ROAD has a Value grade of C, making NX a more attractive option for value investors [6]

Core Insights - Investors are evaluating the value opportunities between Quanex Building Products (NX) and Construction Partners (ROAD) in the Building Products - Miscellaneous sector [1] Valuation Metrics - NX has a forward P/E ratio of 7.78, significantly lower than ROAD's forward P/E of 37.71 [5] - NX's PEG ratio is 0.56, while ROAD's PEG ratio is 0.95, indicating NX's better valuation relative to its expected earnings growth [5] - NX's P/B ratio stands at 0.96, compared to ROAD's P/B of 5.08, suggesting NX is more undervalued based on market value versus book value [6] Zacks Rank and Value Grades - NX holds a Zacks Rank of 1 (Strong Buy), indicating a positive earnings outlook, while ROAD has a Zacks Rank of 3 (Hold) [3] - NX has a Value grade of B, whereas ROAD has a Value grade of C, further supporting NX as the more attractive option for value investors [6]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves navigating inherent risks and volatility [1] Group 1: Company Overview - Construction Partners (ROAD) is highlighted as a recommended growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 14.2%, with projected EPS growth of 50.1% this year, significantly surpassing the industry average of 8.3% [5] Group 2: Financial Metrics - Cash flow growth for Construction Partners stands at 27.2% year-over-year, well above the industry average of 1.9% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 17%, compared to the industry average of 5.5% [7] Group 3: Earnings Estimates - There has been a positive trend in earnings estimate revisions for Construction Partners, with the Zacks Consensus Estimate for the current year increasing by 1.9% over the past month [9] - The combination of a Zacks Rank 2 and a Growth Score of A positions Construction Partners as a potential outperformer for growth investors [11]

Core Viewpoint - Construction Partners (ROAD) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the importance of earnings estimate revisions, which are strongly correlated with near-term stock price movements [4][6]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in stock price movements [4]. Company Performance and Outlook - Construction Partners is projected to earn $2 per share for the fiscal year ending September 2025, reflecting a year-over-year increase of 50.4% [8]. - Over the past three months, the Zacks Consensus Estimate for Construction Partners has risen by 6.6%, indicating a positive trend in earnings expectations [8]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - The upgrade of Construction Partners to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Financial Performance - For the three months ended December 31, 2024, the company reported revenues of $561.58 million, an increase from $396.51 million in the same period of 2023, representing a growth of 41.5%[149]. - Adjusted EBITDA for the same period was $68.80 million, up from $40.87 million in 2023, resulting in an Adjusted EBITDA margin of 12.3%, compared to 10.3% in the prior year[149]. - The net income for the three months ended December 31, 2024, was a loss of $3.05 million, compared to a net income of $9.84 million in the same period of 2023[149]. - Adjusted net income for the same period was $13.27 million, compared to $9.84 million in 2023[150]. - Revenues for the three months ended December 31, 2024 increased by $165.1 million, or 41.6%, to $561.6 million from $396.5 million for the same period in 2023[151]. - Gross profit for the three months ended December 31, 2024 increased by $24.7 million, or 47.6%, to $76.6 million from $51.9 million for the same period in 2023[152]. - General and administrative expenses increased by $8.8 million, or 24.9%, to $44.3 million for the three months ended December 31, 2024, primarily due to expenses from acquired businesses[154]. - Acquisition-related expenses rose to $19.6 million for the three months ended December 31, 2024, compared to $0.5 million for the same period in 2023, mainly due to the Lone Star Acquisition[155]. - Net income (loss) decreased by $12.9 million, or 131.0%, resulting in a net loss of $3.1 million for the three months ended December 31, 2024, compared to net income of $9.8 million for the same period in 2023[159]. - Adjusted EBITDA for the three months ended December 31, 2024 was $68.8 million, representing a 68.3% increase from $40.9 million for the same period in 2023[160]. Acquisitions - The company acquired Lone Star Paving, adding 10 HMA plants, four aggregate facilities, and one liquid asphalt terminal during the three months ended December 31, 2024[137]. - On January 2, 2025, the company acquired Overland Corporation, adding eight HMA plants in Oklahoma and expanding its paving services in northern Texas[138]. - The company also acquired Mobile Asphalt Company LLC on February 3, 2025, adding five HMA plants and expanding operations in southwestern Alabama[139]. - The company incurred transformative acquisition expenses of $18.46 million during the three months ended December 31, 2024[149]. Cash Flow and Debt - Cash provided by operating activities, net of acquisitions, was $40.7 million for the three months ended December 31, 2024, down from $60.4 million for the same period in 2023[161]. - Cash used in investing activities increased significantly to $679.0 million for the three months ended December 31, 2024, primarily due to acquisitions[164]. - Cash provided by financing activities was $694.8 million for the three months ended December 31, 2024, mainly from net proceeds of $835.0 million from the Term Loan B[166]. - The company entered into a Term Loan B Credit Agreement for $850 million, fully drawn on November 1, 2024, to finance acquisitions and repay existing debt[140]. - Total debt obligations amount to $1.24 billion, with significant payments due in 2025 and 2026[175]. - The company has a purchase agreement obligation of $116 million due to sellers of Lone Star, payable in 2025[175]. - The company has sufficient operating cash flow and available borrowings to fund operations and capital expenditures for at least the next 12 months[172]. - A hypothetical 1% change in borrowing rates would result in a $12.4 million change in annual interest expense based on variable rate debt[178]. - Projected interest payments for fiscal year 2025 are estimated at $71.5 million based on a weighted average SOFR-based floating rate of 7.03%[180]. - Total contractual obligations amount to $1.41 billion, with significant payments due in 2025 and 2027[175]. - The company may need to seek additional capital if acquisitions require more funds than available cash[173]. Future Outlook - The company expects total capital expenditures for fiscal 2025 to be approximately $130.0 million to $140.0 million[169]. - Future cash flows are subject to inflation and supply chain constraints, which may impact capital expenditures[173]. - The company has $6.6 million in aggregate letters of credit and future purchase commitments of $3.3 million for diesel fuel and $0.4 million for natural gas[176]. - The fair value of the outstanding interest rate swap contract is $15.6 million as of December 31, 2024[178].

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $561.6 million, an increase of 41.6% year-over-year, with 11.2% organic growth and 30.4% from acquisitions [25][28] - Adjusted net income was $13.3 million, representing a 35% increase compared to the same quarter last year, with diluted earnings per share of $0.25 [27][28] - Adjusted EBITDA was $68.8 million, up 68% year-over-year, with an adjusted EBITDA margin of 12.3%, compared to 10.3% in the prior year [28] Business Line Data and Key Metrics Changes - The company reported a record project backlog of $2.66 billion as of December 31, 2024, indicating strong demand for infrastructure services [15][29] - General and administrative expenses as a percentage of total revenue decreased to 7.9% from 8.9% in the previous year [26] Market Data and Key Metrics Changes - Public infrastructure markets saw total lettings for roads and bridges increase by approximately 16% year-over-year across the company's eight-state footprint [16] - Florida's infrastructure funding grew by over 50% in the first half of the current state fiscal year due to the Moving Florida Forward program [17] Company Strategy and Development Direction - The company continues to focus on strategic acquisitions and organic growth, with a strong acquisition pipeline and a commitment to integrating new companies effectively [19][20] - The long-term strategy emphasizes investment in human capital to build a competitive advantage and ensure sustainable growth [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for infrastructure services, supported by healthy funding mechanisms across states [66][72] - The company anticipates continued growth in funding, projecting mid to high single-digit increases due to the IIJA and state funding programs [105][106] Other Important Information - The company plans to maintain a strong balance sheet while pursuing acquisitions, aiming to reduce leverage to approximately 2.0 times within the next four to five quarters [32][50] - Capital expenditures for Q1 were $26.8 million, with expectations for total capital expenditures in the range of $130 million to $140 million for fiscal 2025 [35][36] Q&A Session Summary Question: Contribution of recent acquisitions to guidance - The combined revenue contribution from the two recent acquisitions is expected to be in the $120 million to $130 million range, with backlog contributions of $90 million to $100 million [42] Question: Comments on purchase price of acquisitions - The purchase prices for the acquisitions were in line with historical multiples, consistent with the company's acquisition strategy [45] Question: Impact of recent acquisitions on gross margins and SG&A - The new acquisitions are expected to have typical margins, and the company aims to improve margins through strategic bidding and integration [58] Question: Cost inflation outlook - The company expects construction inflation to be around 4% to 5%, with stable costs for materials and labor [61] Question: Updates on state DOT funding - All states have healthy funding mechanisms, with Texas and Florida leading in infrastructure funding [66] Question: Concerns about funding delays - Management has not heard of any pauses in funding for projects, with a focus on hard infrastructure [117] Question: Bidding environment and backlog management - The company is able to bid patiently due to a strong backlog, and there has been no significant change in the competitive landscape [122] Question: Breakdown of backlog between public and private activity - The current backlog consists of 58% public and 42% private projects, with expectations for a similar trend as seen in fiscal 2024 [133]

Financial Data and Key Metrics Changes - The company reported record revenue of $561.6 million for the first quarter of fiscal 2025, representing a year-over-year increase of 41.6% [14] - Adjusted net income was $13.3 million, with diluted earnings per share of $0.25, reflecting a 35% increase compared to the same quarter last year [16] - Adjusted EBITDA increased by 68% to $68.8 million, with an adjusted EBITDA margin of 12.3%, up from 10.3% in the prior year [17] - The company experienced a net loss of $3.1 million due to non-recurring expenses related to a transformative acquisition [16] Business Line Data and Key Metrics Changes - The revenue mix for the year included 11.2% organic growth and 30.4% from recent acquisitions [14] - The company achieved a record project backlog of $2.66 billion, indicating strong demand for infrastructure services [17] Market Data and Key Metrics Changes - Local markets in the Sunbelt are growing, with states focused on improving road quality and increasing capacity due to significant migration [9] - Public infrastructure market lettings for roads and bridges increased by approximately 16% year-over-year across the company's eight-state footprint [10] - Florida's infrastructure funding saw contract awards grow by over 50% in the first half of the current state fiscal year due to the Moving Florida Forward program [10] Company Strategy and Development Direction - The company is focused on a strategic growth model that includes both acquisitions and organic growth, with a strong 11% organic growth reported this quarter [11] - The acquisition pipeline remains active, with ongoing conversations in current and potential new states [10] - The company aims to maintain a strong balance sheet while integrating new acquisitions and reducing leverage to approximately 2.5 times in the next four to five quarters [18][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued strong demand for infrastructure services and the ability to bid patiently due to a robust backlog [90] - The company anticipates a typical year for construction inflation, estimating inflation could be around 4% to 5% across the total cost structure [44] - Management expects funding for infrastructure projects to grow in the mid to high single digits, supported by both state funding mechanisms and the IIJA [77] Other Important Information - The company has cash and cash equivalents of $132.5 million and $393.4 million available under its credit facility [17] - Capital expenditures for the first quarter were $26.8 million, with total expected capital expenditures for fiscal 2025 in the range of $130 million to $140 million [20] Q&A Session Summary Question: Contribution of recent acquisitions to guidance - Management indicated that the combined revenue contribution from the two recent acquisitions is expected to be in the range of $120 million to $130 million for the remainder of the year, with a backlog contribution of $90 million to $100 million [27] Question: Need to digest recent acquisitions - Management acknowledged the need to maintain a strong balance sheet while integrating new acquisitions, emphasizing a commitment to organizational integration [32] Question: Cost inflation outlook - Management expects a typical year for construction inflation, with costs being passed through in bids, and noted stable energy costs [44] Question: Updates on state DOT funding - Management reported that all states have healthy funding mechanisms, with Texas and Florida leading in infrastructure funding [47] Question: Concerns about funding delays - Management has not heard of any pauses in funding for projects and noted that the new administration is looking to prioritize hard infrastructure [87] Question: Backlog and bidding environment - Management indicated that while the backlog may plateau, they continue to see plenty of bidding opportunities and are able to bid at good margins [91]

Core Viewpoint - Construction Partners reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, and showing an increase from $0.19 per share a year ago, representing an earnings surprise of 78.57% [1][2] Financial Performance - The company achieved revenues of $561.58 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 9.11%, compared to $396.51 million in the same quarter last year [2] - Over the last four quarters, Construction Partners has consistently exceeded consensus EPS estimates [2] Stock Performance - Since the beginning of the year, Construction Partners shares have declined by approximately 4.5%, while the S&P 500 has gained 3.4% [3] - The current Zacks Rank for Construction Partners is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is -$0.01 on revenues of $515.9 million, and for the current fiscal year, it is $1.95 on revenues of $2.56 billion [7] - The trend of estimate revisions for Construction Partners is currently mixed, which may change following the recent earnings report [6] Industry Context - The Building Products - Miscellaneous industry, to which Construction Partners belongs, is currently in the top 35% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Revenue for Q1 FY25 was $561.6 million, a 41.6% increase from $396.5 million in Q1 FY24[2] - Adjusted EBITDA for Q1 FY25 was $68.8 million, up 68% from $40.9 million in the same quarter last year, resulting in an Adjusted EBITDA margin of 12.25%[2][6] - Adjusted net income for Q1 FY25 was $13.3 million, translating to diluted earnings per share of $0.25[5] - Net income for Q1 FY25 was a loss of $3.1 million, compared to a net income of $9.8 million in Q1 FY24[4] - Adjusted EBITDA for the three months ended December 31, 2024, was $68,797 thousand, an increase from $40,874 thousand in 2023, resulting in an Adjusted EBITDA margin of 12.3%[22] - Revenues for the three months ended December 31, 2024, reached $561,580 thousand, compared to $396,505 thousand in 2023, marking a year-over-year increase of 41.5%[22] - Adjusted net income for the three months ended December 31, 2024, was $13,270 thousand, compared to $9,843 thousand in 2023[24] Project Backlog and Outlook - Record project backlog reached $2.66 billion as of December 31, 2024, compared to $1.62 billion a year earlier[6] - The company raised its fiscal 2025 outlook, projecting revenue between $2.66 billion and $2.74 billion[11] - The company anticipates continued growth driven by strong demand for infrastructure projects in the Sunbelt region[7] - Adjusted EBITDA for fiscal 2025 is projected to be between $375.0 million and $400.0 million, with an Adjusted EBITDA margin of 14.1% to 14.6%[11] - The company projects fiscal year 2025 revenues to be between $2,660,000 thousand and $2,740,000 thousand, with an Adjusted EBITDA forecast of $375,000 thousand to $400,000 thousand[26] Acquisitions and Expenses - The company completed the acquisition of Lone Star Paving and two additional acquisitions in early 2025, expanding its market presence[2] - Business acquisitions in the current quarter amounted to $654,200 thousand, significantly higher than $81,351 thousand in the same quarter of the previous year[19] - General and administrative expenses were $44.3 million, decreasing as a percentage of total revenues to 7.9% from 8.9% in the same quarter last year[3] - Share-based compensation expense increased to $14,403 thousand for the three months ended December 31, 2024, compared to $2,889 thousand in 2023[19] Cash and Assets - Total assets increased to $2,567,916 thousand as of December 31, 2024, up from $1,542,135 thousand on September 30, 2024, representing a growth of 67%[17] - Cash, cash equivalents, and restricted cash at the end of the period were $133,068 thousand, up from $69,711 thousand in the previous year[19] - The company reported cash paid for interest of $15,051 thousand for the quarter, up from $4,692 thousand in the previous year[19]