On Tuesday, Summit Materials (NYSE: NYSE:SUM) experienced a change in stock rating by Loop Capital, moving from Buy to Hold. The adjustment was accompanied by a new price target set at $52.50, a slight decrease from the previous target of $54.00. This revision follows the announcement made on Monday that Summit Materials has agreed to be acquired by Quikrete for $52.50 per share.
The acquisition price is valued at approximately 10.3 times Summit's projected FY25E EBITDA, surpassing the initial expectation of $50 per share and nearing the former price target of $54. The deal's valuation was considered fair by Loop Capital, as it reflects a sum-of-the-parts (SOTP) valuation, which amounts to roughly 14 times EBITDA for the aggregates segment, 10 times for cement, and 6 times for downstream operations.
The transaction is anticipated to be completed in the first half of 2025, although Loop Capital suggests that the process could be finalized earlier within that timeframe if regulatory approvals are obtained without delay. The rationale behind the sale and the agreed price were deemed reasonable by the firm.
The adjustment in Loop Capital's rating to Hold from Buy reflects the approaching takeover of Summit Materials. The price target has been modified to align with the sale price agreed upon in the acquisition deal.
In other recent news, Summit Materials has been the subject of multiple significant developments. The company has entered into a definitive agreement to be acquired by Quikrete Holdings for approximately $11.5 billion. This acquisition, expected to close in the first half of 2025, will result in Summit Materials becoming a privately held subsidiary of Quikrete.
Analyst firm JPMorgan has adjusted its stance on this development, downgrading the stock from Overweight to Neutral, while also increasing the price target to $52.50.
Summit Materials has also reported strong Q3 results, setting record quarterly adjusted EBITDA margins of 28.3%. The company has raised its 2024 EBITDA outlook to between $970 million and $1 billion, indicating approximately 7% growth. Analyst firm Loop Capital has expressed confidence in Summit Materials, raising its price target to $54 from $49 while maintaining a Buy rating.
The company has also made changes to its fiscal year, transitioning from a 52-53 week period ending near December 31st to a standard calendar year ending December 31st. This move is expected to simplify the accounting process and facilitate comparisons with industry peers. These recent developments reflect Summit Materials' ability to navigate challenges while maintaining operational excellence and pricing discipline.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Summit Materials' financial position and market performance, providing context to the acquisition news. The company's market capitalization stands at $8.91 billion, reflecting its significant presence in the materials sector. Summit Materials has demonstrated strong revenue growth, with a 49.49% increase in the last twelve months as of Q3 2024, reaching $3.75 billion. This growth trend aligns with the InvestingPro Tip that analysts anticipate sales growth in the current year.
The company's stock has shown robust performance, with a 45.37% price total return over the past year and a 25.28% return in the last three months. This upward trajectory is further supported by the InvestingPro Tip indicating that Summit Materials is trading near its 52-week high, with the current price at 94.88% of that peak.
While the P/E ratio (adjusted) of 116.77 suggests a high valuation, it's worth noting that the acquisition price of $52.50 per share represents a premium over the current trading price. This premium aligns with another InvestingPro Tip stating that the company is trading at a high earnings multiple.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for Summit Materials, providing a deeper understanding of the company's financial health and market position.
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