The Zacks Building Products-Miscellaneous Industry is currently in the bottom 19% of 246 Zacks industries, and Arcosa ACA may be a stock to avoid in particular. Having a Zacks Rank #5 (Strong Sell), Arcosa lands the Bear of the Day.  

Compounding tougher market conditions, the manufacturer of infrastructure-related products and services is facing operational issues. Notably, the Indiana Department of Environmental Management (IDEM) has warned its aggregates division (Arcosa Lightweight) of potential emissions violations. 

Arcosa’s Subpar Q4 Results

Reporting fourth-quarter results in early February, Arcosa’s Q4 sales rose 14% to $666.2 million but missed estimates of $694.2 million by 4%.

More concerning, Arcosa reported a net income loss of $7.7 million compared to a profit of $27.1 million in Q4 2023. Adjusted Q4 EPS was at $0.46, although this dropped from $0.68 a year ago and missed expectations of $0.79 by 42%.

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Declining EPS Revisions & P/E Valuation 

Taking away from Arcosa’s appealing growth trajectory is that fiscal 2025 EPS estimates have dropped 13% over the last 30 days from $4.81 to $4.56. Unfortunately, a trend of declining earnings estimate revisions could continue following the company’s eye-catching earnings miss.  

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Furthermore, while Arcosa’s stock trades at a reasonable 20.1X forward earnings multiple, it's noteworthy that this is above the industry average of 16.8X with some of its notable peers in the space being CRH plc CRH and TopBuild BLD.

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Bottom Line

As of now, it's unclear if Arcosa can fulfill its lofty earnings expectations with double-digit EPS growth expected in FY25. Unless of course, earnings estimate revisions keep declining, which would signal more downside risk for ACA shares.  

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This article originally published on Zacks Investment Research (zacks.com).

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