Advanced Drainage Systems (NYSE:WMS) Announces Earnings Results, Beats Expectations By $0.39 EPS

Key Points

• Advanced Drainage Systems beat quarterly expectations: EPS was $2.49 versus the $2.10 consensus estimate, while revenue reached approximately $1.0 billion, up 20.6% year over year. Adjusted EBITDA rose 29% to $358 million, supported by strength in non-residential, wastewater and stormwater products.
• Management maintained its full-year outlook of $3.35 billion–$3.55 billion in revenue and $1.0 billion–$1.05 billion in adjusted EBITDA, but warned that higher resin and transportation costs could pressure margins in the second and third quarters.
• Shareholders will receive a higher dividend: The quarterly payout was increased 11% year over year to $0.20 per share, although the stock traded down to about $144 following the results as investors weighed cost pressures and valuation.

Advanced Drainage Systems (NYSE:WMS - Get Free Report) posted its earnings results on Thursday. The construction company reported $2.49 EPS for the quarter, topping the consensus estimate of $2.10 by $0.39, Zacks reports. Advanced Drainage Systems had a net margin of 13.98% and a return on equity of 26.63%. The firm had revenue of $1 billion for the quarter, compared to the consensus estimate of $991.39 million. During the same period in the prior year, the business posted $1.95 earnings per share. The business's quarterly revenue was up 20.6% on a year-over-year basis.

Here are the key takeaways from Advanced Drainage Systems' conference call:

• Strong first-quarter results: Revenue surpassed $1 billion, up 21% year over year, while organic sales rose 9% and adjusted EBITDA increased 29% to $358 million, producing a 35.8% margin.
• Diversification supported outperformance: Non-residential sales grew 14% organically, wastewater revenue increased 8%, and stormwater storage products rose 18%, helping offset weakness in residential construction and retail.
• NDS integration is progressing: NDS generated $95 million of revenue in the quarter and performed strongly, although management said meaningful cross-selling synergies are still ahead and cautioned that the first quarter is typically its strongest.
• Near-term margin pressure is expected: Approximately $25 million-$30 million of revenue was pulled into the first quarter ahead of price increases, while higher resin and transportation costs are expected to weigh more heavily in the second and third quarters, causing sequential margin compression beyond the normal 300 basis points.
• Guidance and financial flexibility were maintained: Full-year revenue guidance remains $3.35 billion-$3.55 billion and adjusted EBITDA guidance remains $1.0 billion-$1.05 billion; free cash flow was $203 million, net leverage was approximately 1.5 times, and the company repurchased about $250 million of shares and dividends in the quarter.

Advanced Drainage Systems Stock Performance

WMS stock traded down $4.17 during trading on Friday, reaching $144.28. 825,757 shares of the stock were exchanged, compared to its average volume of 854,527. Advanced Drainage Systems has a twelve month low of $128.03 and a twelve month high of $179.32. The company has a current ratio of 2.42, a quick ratio of 1.35 and a debt-to-equity ratio of 0.92. The company has a market capitalization of $11.06 billion, a P/E ratio of 26.52, a price-to-earnings-growth ratio of 1.61 and a beta of 1.27. The stock has a 50 day simple moving average of $143.75 and a 200-day simple moving average of $147.99.

Advanced Drainage Systems Announces Dividend

The company also recently announced a quarterly dividend, which will be paid on Tuesday, September 15th. Investors of record on Tuesday, September 1st will be given a dividend of $0.20 per share. The ex-dividend date of this dividend is Tuesday, September 1st. This represents a $0.80 dividend on an annualized basis and a yield of 0.6%. Advanced Drainage Systems's dividend payout ratio (DPR) is 14.71%.

Key Stories Impacting Advanced Drainage Systems

Here are the key news stories impacting Advanced Drainage Systems this week:

• Positive Sentiment: Results exceeded expectations: Fiscal Q1 2027 EPS was $2.49, above the $2.10-$2.19 analyst estimates and up from $1.95 a year earlier. Revenue reached approximately $1.0 billion, beating the $991.4 million consensus estimate and increasing 20.6% year over year. Advanced Drainage Systems Announces First Quarter Fiscal 2027 Results
• Positive Sentiment: Dividend increased: The board approved a quarterly dividend of $0.20 per share, an 11% increase from the prior year. The dividend is payable September 15 to shareholders of record September 1. Advanced Drainage Systems Announces Quarterly Cash Dividend
• Neutral Sentiment: Fiscal 2027 outlook was broadly in line: Management forecast revenue of $3.4 billion to $3.6 billion, surrounding the roughly $3.5 billion consensus estimate. The range does not represent a clear upward revision that would materially improve investor expectations. Advanced Drainage Systems Q1 Earnings and Revenues Top Estimates
• Negative Sentiment: Cost pressures cloud the outlook: Commentary highlighted inflation and recycling-market factors that could pressure margins or limit the benefit of strong demand, causing investors to focus on forward profitability rather than the quarterly beat. WMS Q2 Deep Dive
• Negative Sentiment: Valuation may limit upside: At roughly 26.5 times earnings and a 1.61 PEG ratio, WMS is not an obvious deep-value stock. A comparison with Gibraltar Industries (ROCK) may encourage valuation-sensitive investors to favor the alternative. ROCK or WMS: Which Is the Better Value Stock Right Now?

Analyst Ratings Changes

WMS has been the topic of a number of analyst reports. UBS Group reissued a "buy" rating and set a $207.00 price objective on shares of Advanced Drainage Systems in a report on Friday. Weiss Ratings reaffirmed a "hold (c)" rating on shares of Advanced Drainage Systems in a report on Friday, July 17th. Stephens upgraded shares of Advanced Drainage Systems from an "equal weight" rating to an "overweight" rating and dropped their target price for the stock from $190.00 to $175.00 in a report on Wednesday, May 27th. Jefferies Financial Group began coverage on shares of Advanced Drainage Systems in a research report on Thursday, June 11th. They set a "buy" rating and a $175.00 target price for the company. Finally, Oppenheimer lowered their price target on Advanced Drainage Systems from $195.00 to $190.00 and set an "outperform" rating on the stock in a research report on Tuesday, May 26th. Seven equities research analysts have rated the stock with a Buy rating and two have given a Hold rating to the company. Based on data from MarketBeat.com, the stock presently has a consensus rating of "Moderate Buy" and an average price target of $188.38.

Institutional Trading of Advanced Drainage Systems

A number of hedge funds have recently modified their holdings of WMS. State Street Corp increased its position in shares of Advanced Drainage Systems by 3.1% during the third quarter. State Street Corp now owns 2,551,901 shares of the construction company's stock valued at $353,949,000 after purchasing an additional 75,777 shares during the period. Amundi lifted its position in Advanced Drainage Systems by 80.9% in the fourth quarter. Amundi now owns 1,279,576 shares of the construction company's stock worth $185,324,000 after purchasing an additional 572,193 shares during the period. Wellington Management Group LLP boosted its stake in Advanced Drainage Systems by 6.3% during the fourth quarter. Wellington Management Group LLP now owns 1,264,156 shares of the construction company's stock worth $183,088,000 after buying an additional 75,250 shares in the last quarter. Dimensional Fund Advisors LP increased its holdings in Advanced Drainage Systems by 4.5% in the 4th quarter. Dimensional Fund Advisors LP now owns 1,189,064 shares of the construction company's stock valued at $172,224,000 after buying an additional 50,686 shares during the period. Finally, Charles Schwab Investment Management Inc. increased its holdings in Advanced Drainage Systems by 2.8% in the 4th quarter. Charles Schwab Investment Management Inc. now owns 717,958 shares of the construction company's stock valued at $103,982,000 after buying an additional 19,689 shares during the period. Institutional investors own 89.83% of the company's stock.

About Advanced Drainage Systems

Advanced Drainage Systems, Inc NYSE: WMS is a leading manufacturer and supplier of water management solutions in North America. Headquartered in Hilliard, Ohio, the company specializes in the design, production and distribution of high-density polyethylene (HDPE) drainage pipe and related products. Its core business addresses stormwater management, on-site septic systems and erosion control for residential, commercial and infrastructure projects.

The company's product portfolio includes corrugated plastic pipe, tubing, fittings, geocells, geogrids and stormwater structures such as inlets, manholes and detention/retention systems.

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