Weaker-than-expected results took some of the momentum out of this big winner.
Expectations were sky-high for Core & Main (CNM -13.72%) coming into earnings. Unfortunately, the news did not match the hype.
Shares of Core & Main traded down 14% as of 10:30 a.m. ET after the company missed top- and bottom-line expectations and cut full-year guidance.
Rainy days dampen growth
Core & Main is a distributor of water products used by municipalities, private water companies, and professional contractors. A big part of the push to modernize infrastructure is replacing aging water and sewer lines, creating a lot of demand for the products that Core & Main sources.
The company reported earnings of $0.61 per share in its fiscal second quarter (ended July 28) on sales of $1.96 billion. Although sales were up 5.5% year over year and gross profit was up 3.4%, the results fell short of Wall Street’s estimate for $0.74 per share on sales of $2.1 billion.
CEO Steve LeClair said that growth was impacted by wet weather conditions, which delayed some projects, and lower end-market volumes.
The company cut its full-year revenue forecast by $200 million to a range of $7.3 billion to $7.4 billion due to the weather disruptions and expectations that some projects that Core & Main had expected to begin in 2024 will be pushed into 2025.
Is Core & Main stock a buy?
Core & Main stock has been a big winner over the past year due to expectations for an uptick in business. The stock has given up some of those gains in recent days, but the long-term outlook is still strong.
The timing is uncertain, but Core & Main is a leading distributor selling into markets where demand is expected to increase. The company also continues to consolidate — doing five deals since the quarter ended — which should help broaden its addressable market.
Even with the decline, the stock, trading at about 19 times earnings, is not inexpensive. But the market potential is real. Investors with a long-term outlook might want to consider Core & Main shares following the drop.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
