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New data shows that what US businesses pay for labor rose at a moderate pace last quarter. This suggests that the sharp wage inflation of the last few years is cooling off.
For a business like this one, which employs thousands of workers to operate asphalt plants and construction crews, labor is one of the biggest costs. When wages rise slowly and predictably, it is easier for the company to price its long-term projects accurately and keep its profit margins steady.
Source: Reuters
New orders for key US-manufactured capital goods, which are items intended to last a long time like machinery and equipment, rose in September. Shipments of these products also picked up speed, indicating that businesses are continuing to invest in their operations.
For a road construction firm like Construction Partners, this is a helpful sign of economic health. When businesses spend more on equipment and infrastructure, it often signals a broader demand for the types of large-scale paving and maintenance projects that fill the company's multi-billion dollar project backlog.
Source: Reuters
Raymond James trimmed its price target from $150 to $145 on Friday but kept its highest rating on the stock. This small adjustment still leaves the firm's target about 70 percent higher than where the stock trades today. While several analysts have adjusted their numbers recently, the average target across all firms remains near $139. This suggests that Wall Street still expects the company to grow significantly as it works through its record backlog of road construction projects.
Source: Raymond James
The U.S. Transportation Secretary and several major airlines are urging Congress to approve 30 billion dollars for aviation upgrades. The money would go toward improving airport facilities and modernizing air traffic control software and towers.
This is relevant because Construction Partners focuses on heavy civil infrastructure in the Southeast. While much of its work is on roads and highways, airport facility upgrades often involve the same kind of large-scale paving and asphalt work that the company specializes in. If this funding is approved, it would expand the pool of government-funded projects the company can bid on.
Source: Reuters
The Federal Reserve raised interest rates this week for the first time in three years. Higher rates make it more expensive for companies to borrow money and can slow down large construction projects that rely on government financing.
For a company like Construction Partners, which has been borrowing heavily to buy up smaller rivals, higher rates mean it will likely pay more to fund its future growth. While the company has a large backlog of signed work, a long period of high rates could eventually squeeze the infrastructure budgets of the states where it operates.
Source: CNBC Television
Management has a history of setting conservative targets and then clearing them, often by wide margins. This suggests the business is growing faster than their own forecasts can keep up with.
| Expectation | |
|---|---|
| EPS | $1.37 |
| Revenue | $1.09B |
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