Construction Partners Buys HMA Manufacturing & Paving Firm

In a bid to expand presence in Gadsden, AL, Construction Partners, Inc. (NASDAQ:ROAD) announced the acquisition of a hot mix asphalt ("HMA") manufacturing plant and paving company. The acquisition will allow Construction Partners to grow operations in the northeast Alabama market, thereby increasing the company’s revenues and earnings.

Notably, this acquisition marks the company’s fourth acquisition since the announcement of its initial public offering in 2018. However, the terms of the deal have been still kept under wraps.

Strategic Acquisitions to Drive Top-Line Performance

Construction Partners is a vertically integrated civil infrastructure company that constructs and maintains roadways across five southeastern states. The company focuses on acquisition growth strategy, particularly in the hot mix asphalt paving and construction industry.

On Feb 26, 2019, one of its subsidiaries executed an asset purchase agreement for the buyout of a HMA and ready-mix concrete business situated in Okeechobee, FL. The buyout has helped the company serve new markets in south central Florida.

Again in 2018, it completed the acquisition of The Scruggs Company ("Scruggs"). Scruggs increased Construction Partners’ new bidding areas, resulting in Georgia market expansion.

In the first six months of fiscal 2019, the company’s revenues grew 18.3% year over year, backed by solid acquisitions and higher backlog of construction projects. Of this growth, nearly 11% was contributed by Scruggs.

Coming to the price performance, the company’s shares have outperformed its industry so far this year. The stock has rallied 64.9%, comparing favorably with its industry’s 31.3% growth in the said period. The solid price appreciation was mainly driven by the company’s impressive performance on the back of strategic buyouts and strong demand.

Zacks Rank & Other Key Picks

Currently, Construction Partners carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same space include Advanced Drainage Systems, Inc. (NYSE:WMS) , Quanex Building Products Corporation (NYSE:NX) and TopBuild Corp. (NYSE:BLD) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Drainage Systems, Quanex Building Products and TopBuild’s earnings for the current year are expected to grow 9.8%, 30.8% and 21.7%, respectively.

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