Advanced Drainage Stock Is A Top Pick Despite End-Market Weakness: Bullish Analyst Highlights Solid Margin Profile

Oppenheimer analyst Bryan F. Blair reiterated an Outperform rating on the shares of Advanced Drainage Systems, Inc. WMS, raising the price target to $115 from $108.
Blair suggests Advanced Drainage as a "top pick," while construction-driven stocks generally remain "out of favor."
The company is well-positioned to navigate end-market weakness and leverage the recovery in construction demand.
The analyst mainly applauds the company's growth strategies across new geographies where drainage has been less widely adopted.
The strategies notably increased Advanced Drainage's TAM estimate to $15 billion (from $7 billion-plus), reflecting underlying market growth, inflation, and the addition of the active onsite septic business.
Advanced Drainage recently reported street-beating performance in the fourth quarter of FY23, where it revealed its plan to focus on growth opportunities in the Infrastructure and Agriculture markets, onshoring projects, and market penetration opportunities for products such as our HP pipe, Allied products, onsite septic tanks, and active onsite treatment products to drive above market growth.
Looking ahead, Blair sees Price/cost and rightsizing actions as margin tailwinds (countering near-term volume pressure).
The analyst says Advanced Drainage will also extend market outgrowth in the future and sustain attractive margins and return generation.
Price Action: WMS shares are trading lower by 2.85% to $95.60 on the last check Friday.

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