Advanced Drainage Systems Is Poised For Market Outgrowth, Economic Moats And Skyrocketing Revenues: Analyst

Oppenheimer analyst Bryan F. Blair reiterated an Outperform rating on Advanced Drainage Systems, Inc. WMS, raising the price target to $148 from $140.

Blair notes Advanced Drainage focuses on expanding channel partnerships (over 3,000) and furthering relationships with top homebuilders to enhance residential market share.

The analyst highlights the company's broadening economic moats and substantial earnings potential (likely inflection into FY25) with the still-underappreciated re-rating prospects of shares.

According to the analyst, this apart, material conversion (concrete pipes to plastic pipes) remains a powerful/sustainable driver of Advanced Drainage's growth trajectory. 

As the company continues to garner approvals (especially in crucial construction states), the analyst anticipates plastic market share to climb significantly above current ~40% levels. 

Also Read: Advanced Drainage's Super Ability To Boost Margins: Analyst Highlights How

Adding to the underlying demand support of material conversion, Advanced Drainage benefits from unmatched resource scale (across manufacturing, transportation/logistics, engineering), adds the analyst.

The analyst believes Advanced Drainage will sustain market outgrowth via the factors complemented by further penetration of key construction states.

For FY24, the analyst expects revenues of $2.8 billion, with an adjusted EPS estimate of $5.72.

For FY25, the analyst expects revenues of $3 billion, with an adjusted EPS estimate of $6.30.

Based on the above, the analyst maintained FY24/25E EBITDA at $827 million/$875 million.

Price Action: WMS shares are trading higher by 0.07% to $127.95 on the last check Thursday.