Construction Partners is the IBD Stock Of The Day, as shares probe record highs after a beat-and-raise report a week ago.
In a heavy construction industry group with multiple stocks near buy points, Construction Partners stands out with the group's highest Composite Rating, a best-possible 99.
The road and highway builder works mainly in Sunbelt states. It has a fairly dependable customer base of state and federal agencies that need to keep transportation routes open. Nonetheless, it's had its slower periods, such as several quarters in 2023-24 when sales gains were in the teens.
Dothan, Ala.-based Construction Partners last Friday reported earnings of 8 cents a share for the March-ended quarter vs. a year-ago loss of 2 cents a share. Sales grew 54% to $571.7 million. Those numbers beat analysts' consensus estimates, according to FactSet. Sales growth ramped up from 13% to 42% in the two previous quarters.
Management sounded confident, citing a record project backlog of $2.84 billion.
"We are well-positioned for continued success to build out this record backlog as we move into the busy construction work season in the second half of our fiscal year," CEO Fred "Jule" Smith said in the earnings release. "We continue to experience healthy federal and state project funding across our geographies in addition to a steady workflow of commercial projects ..."
Construction Stock Raises Forecast
For the fiscal year ending in September, it raised its sales forecast to $2.77 billion to $2.83 billion, and now expects net income of $106 million to $117 million. That would work out to a 55% increase in sales at the midpoint and a 72% midpoint increase for net income.
Construction Partners is using acquisitions for growth, too. Since the company went public seven years ago, it has made 36 acquisitions. It announced its most recent deals May 1: It bought PRI of East Tennessee, an asphalt producer and construction business, and Pavement Restorations, a road maintenance company. Both are based in Tennessee.
The stock jumped 3.5% when it issued its March-quarter results. It continued to climb and touched the 103.69 buy point of a 22-week cup base Tuesday, but stalled. Today, shares are 3% below the entry. The stock may need to form a handle to make a serious push higher.
Construction Stock's RS Line Rises
The relative strength line is making new highs, which is a positive sign.
Construction Partners stock has a 21-day average true range (ATR) of 4.41%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
There are exceptions, but given current market conditions, IBD generally suggests investors keep most of their portfolio focused on stocks with ATRs at or below 6%.
