On Wednesday, DA Davidson showed confidence in the infrastructure products company Arcosa (NYSE:ACA), raising its price target on the company's shares from $90 to $95 while maintaining a Buy rating on the stock. This adjustment reflects a positive outlook for the company's future performance, particularly in the next two years.
The firm's analyst cited several reasons for the increased price target, including better growth expectations for 2024, a solid backlog, and a favorable business pipeline. The new price target is equivalent to 12 times the estimated EBITDA for 2024 and 11 times for 2025. These multiples indicate the firm's belief in the company's earnings potential.
Arcosa, which trades on the New York Stock Exchange under the ticker NYSE:ACA, is seen to benefit from various market factors. The company's visibility within existing backlogs and the evident increases in infrastructure lettings, utility capital initiatives, and incoming orders in the barge sector are all factors that support the case for improving earnings and cash flow.
Moreover, the analyst pointed to the potential for additional earnings contributions from tax credits associated with an increase in wind deliveries expected in 2024 and 2025. While these contributions are incorporated in the company's guidance, they have not been explicitly disclosed. The possibility of these tax credits materializing is seen as an additional opportunity for the company's financial performance.
DA Davidson's revised price target for Arcosa represents a belief in the company's robust growth trajectory and the potential for increased earnings driven by a strong order backlog, infrastructure investments, and favorable market conditions. The firm's outlook suggests that Arcosa is well-positioned to capitalize on these opportunities in the coming years.
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