CNM - Stock Pressured on Roughly Expected Results; Inflation Views More Muted

Research evidence excerpt

CNM - Stock Pressured on Roughly Expected Results; Inflation Views More Muted

loat 4.9% (Street $7,847 million) or 2-3% y/y growth. Adjusted EBITDA is expected to fall between

Enterprise Value ($M) $11,635 $950-$980 million (Street $969 million). The guide is still predicated on flat end markets

Cash & Equivalents ($M) $150 with municipal strength being offset by slower private construction and above market

volume growth. While pricing could now be a tailwind as supplier price increases come in, Total Debt ($M) $2,144

management refrained from raising the guide pointing to increased uncertainty for residential

markets surrounding the Middle East conflict.

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Price Increase Announcements Won't Hit Revenues Until 3Q. While management has

already seen price increase announcements from suppliers, they do not expect any impact

Reasons for this report to the P&L until 3Q. We note the company has started to pass through price increases in

bidding and quoting activity, but revenues from these activities are recognized on a lagged

✓ Earnings Recap basis.

✓ Adjusting Estimates

Revenues Flat On Lower Volumes & Acquisition Growth. Net sales were roughly flat

as 1% volume declines were offset by 1% growth from acquisitions with pricing flat for the

quarter. Sales for pipes, valves & fittings, and storm drainage declined on lower volumes

partially offset by acquisitions, while sales for fire protection products increased from higher

volumes and higher prices. Smart utility products also experienced sales growth due to

higher volumes.

Margins Expand on Internal Initiatives. Gross profit margin of 27.2% increased 50bps

benefitting from private label growth in addition to purchasing and pricing management.