Summit Materials, Inc. SUM acknowledged that 98.8% of its shareholders voted in favor of the earlier announced merger deal with Cementos Argos S.A. (CCB.CN, CEMARGOS CB).
On Sep 7, 2023, Summit signed an agreement to merge with Argos North America Corp. ("Argos USA") to create the fourth-largest cement platform in the United States and accelerate its 'Elevate Summit' strategy. The deal, which is expected to close today, will likely generate annual synergies of at least $100 million, with approximately 50% delivered within the first 24 months.
Also, the combined company is expected to increase the free cash flow per share 15-25%, thereby creating a powerful engine to reduce leverage and invest in organic and inorganic growth opportunities.
This is subject to the satisfaction of the remaining closing conditions set forth in the Transaction Agreement.
About Argos USA
Argos USA is one of the largest cement producers by total installed capacity in its areas of operations, including Southeast, Mid-Atlantic and Texas. The company has four integrated cement plants, approximately 140 ready-mix plants and eight ports. This makes its portfolio well-positioned to capitalize on positive demand drivers across public infrastructure and residential and commercial end markets. Approximately 85% of Argos USA's EBITDA is generated from its leading cement platform.
Summit’s Focus on Growth
Summit is focusing on accelerating its growth through various accretive initiatives, one of which is acquisitions. The buyout strategy helps the company gain growth opportunities in new as well as existing markets and broaden its product portfolio.
In August 2023, SUM announced a deal with a few of the Blackstone Inc. affiliates to acquire all the rights and interests of each of the Blackstone Tax Receivable Agreement (“TRA”) Parties. This was stated in the TRA, dated Mar 11, 2015, which was drafted by and among Summit, the Blackstone TRA Parties and a few other parties.
In the third quarter of 2023, net revenues increased 8.2% year over year, with adjusted EBITDA and adjusted earnings per share rising 12.8% and 15.7%, respectively. Solid execution and a powerful, materials-led portfolio drove significant growth. The company’s sustainable pricing momentum for all its lines of business and local markets, along with enabling enterprise-wide social responsibility initiatives, has led to solid profitability growth.
Thanks to the factors mentioned above, SUM raised its 2023 guidance for adjusted EBITDA to approximately $560-$570 million from $550-$570 million projected earlier.
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Summit, which currently carries a Zacks Rank #3 (Hold), has gained 11.8% in the past three months compared with the Zacks Building Products - Concrete and Aggregates industry’s 14.6% growth. Earnings estimates for 2024 have increased to $1.82 per share from $1.76 over the past 60 days. This indicates a year-over-year rise of 23.1%. It also has a favorable VGM Score of A.
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
Martin Marietta Materials, Inc. MLM sports a Zacks Rank #1 (Strong Buy) at present. It has a trailing four-quarter earnings surprise of 37.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MLM’s 2024 sales and earnings per share suggests growth of 9.2% and 13.8%, respectively, from the year-ago period’s levels.
Eagle Materials Inc. EXP currently carries a Zacks Rank #2 (Buy). EXP’s earnings surprise in the last four quarters was 5.4%, on average.
Also, fiscal 2024 earnings estimates have remained stable at $15.52 per share over the past 60 days. Earnings for fiscal 2024 are expected to grow 9.6% year over year.
CEMEX, S.A.B. de C.V. CX presently carries a Zacks Rank #2.
In the past seven days, CEMEX’s earnings estimates have increased to 93 cents per share from 90 cents, reflecting 38.8% year-over-year growth.
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