Higher interest rates are putting pressure on industrial activity and construction, softening demand for concrete. That could explain why shares of Concrete Pumping Holdings (BBCP -2.23%), one of the companies responsible for all of that concrete, traded down 11% on Friday at 10:30 a.m. ET after the company missed quarterly estimates and lowered full-year expectations.
Rates, and rain, complicate the job site
Concrete Pumping earned $0.05 per share in its fiscal second quarter, ending April 30, on revenue of $107.1 million, falling short of Wall Street's estimates of $0.10 per share on $112 million in sales. Revenue and income for operations were both down slightly year over year, with concrete waste disposal up, but new construction projects down.
CEO Bruce Young attributed the decline in concrete pumping to "interest-rate-sensitive commercial work being further delayed, as well as another quarter of above-average rainfall in Texas and our markets in the southwestern United States."
Commercial projects are being hit particularly hard but were partly offset by improvements in residential and infrastructure projects. The company's infrastructure revenue was up 14% from a year ago, an early sign of the funding authorized under the Infrastructure Investment and Jobs Act.
Is Concrete Pumping a buy after its weak quarter?
Management does not expect the market to turn quickly. Concrete Pumping cut its full-year revenue guidance to a range of $455 million to $465 million, down from $460 million to $480 million.
Big construction projects can't stop and start on a dime, so even if rates do ease in the months to come, the lag in orders could last well into 2025.
In the long term, the need for infrastructure improvements and homebuilding should fuel solid demand for Concrete Pumping's products. But if nothing else, the quarter underscores that investors are going to need to be patient.
