Expectations were sky-high for Core & Main (CNM 3.06%) coming into earnings. Unfortunately, the news did not match the hype.
Shares of Core & Main traded down 14% as of 10:30 a.m. ET after the company missed top- and bottom-line expectations and cut full-year guidance.
Rainy days dampen growth
Core & Main is a distributor of water products used by municipalities, private water companies, and professional contractors. A big part of the push to modernize infrastructure is replacing aging water and sewer lines, creating a lot of demand for the products that Core & Main sources.
The company reported earnings of $0.61 per share in its fiscal second quarter (ended July 28) on sales of $1.96 billion. Although sales were up 5.5% year over year and gross profit was up 3.4%, the results fell short of Wall Street's estimate for $0.74 per share on sales of $2.1 billion.
CEO Steve LeClair said that growth was impacted by wet weather conditions, which delayed some projects, and lower end-market volumes.
The company cut its full-year revenue forecast by $200 million to a range of $7.3 billion to $7.4 billion due to the weather disruptions and expectations that some projects that Core & Main had expected to begin in 2024 will be pushed into 2025.
NYSE: CNM
Key Data Points
Is Core & Main stock a buy?
Core & Main stock has been a big winner over the past year due to expectations for an uptick in business. The stock has given up some of those gains in recent days, but the long-term outlook is still strong.
The timing is uncertain, but Core & Main is a leading distributor selling into markets where demand is expected to increase. The company also continues to consolidate -- doing five deals since the quarter ended -- which should help broaden its addressable market.
Even with the decline, the stock, trading at about 19 times earnings, is not inexpensive. But the market potential is real. Investors with a long-term outlook might want to consider Core & Main shares following the drop.
