On Monday, Loop Capital has increased its stock price target for Arcosa Inc. (NYSE: NYSE:ACA) shares, setting a new goal of $110, up from the previous $95, while maintaining a Buy rating on the stock. The firm's decision follows Arcosa's announcement of a raised EBITDA guidance, the acquisition of Stavola, and the divestiture of its steel components business.
Arcosa's recent quarterly performance and strategic moves have been positively received by Loop Capital, which cites the company's successful legacy operations, its accelerated shift towards construction products, and effective execution of its portfolio optimization plan. Despite these achievements, the analyst noted a surprising pullback in the stock's price.
The acquisition of Stavola, a company specializing in hard stone aggregates, has been deemed appropriately valued by Loop Capital, contrasting with the market's reaction. The valuation stands at 16 times gross EBITDA for aggregates and 7 times for asphalt, figures that the firm finds reasonable given the strong margin accretion Arcosa is expected to experience.
Loop Capital also addressed concerns regarding Arcosa's leverage, which is projected to reach 3.7 times net debt on a pro forma basis after the recent transactions. The firm expressed confidence in Arcosa's ability to achieve its target leverage ratio of 2 to 2.5 times within the next 18 months.
The stock price target adjustment to $110 reflects a $15 increase and is seen by Loop Capital as an opportunity for investors to buy into Arcosa shares, given the recent market developments and the company's solid financial guidance.
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