Arcosa’s 2021 Revenue Outlook Disappoints After 4Q Miss; Stock Plunges 16%

Arcosa disappointed investors with its weaker-than-expected 4Q performance. Moreover, the infrastructure-related products and solutions provider issued a 2021 revenue outlook that fell short of Wall Street’s estimates. Shares fell 4.2% in extended trading after witnessing a big drop of about 15.8% on Thursday.

Arcosa (ACA) posted 4Q earnings of $0.33 per share, which came in below the analysts’ expectations of $0.41 per share and declined 23.3% year-over-year. Meanwhile, 4Q revenues of $458.9 million increased 3% year-over-year but lagged the consensus estimates of $463.6 million. Adjusted EBITDA grew 6% to $56.4 million in 4Q.

As for 2021, the company projects revenues to be in the range of $1.78-$1.90 billion, lower than analysts’ expectations of $1.95 billion. Furthermore, it expects adjusted EBITDA in the range of $250-$270 million.

Arcosa said, “Looking ahead into 2021, we are optimistic on the underlying health of most of our markets, and our key growth businesses in Construction Products and Engineered Structures are positioned well for organic and acquisition growth.”

The company continued to note that, “The largest year-over-year challenge in 2021 will be in our Transportation Products segment, as the barge business continues to be impacted by the effects of COVID-19,” the company further said. (See Arcosa stock analysis on TipRanks)

Following the earnings report, Oppenheimer analyst Ian Zaffino raised the stock’s price target to $70 from $60 and maintained a Buy rating. This implies upside potential of around 22% over the next 12 months.

In a note to investors, Zaffino said, “Despite a soft barge and rail market, Construction and Engineered remains resilient and both are well-positioned for growth. In particular, construction activity remains robust, particularly in Texas, and could see meaningful upside from new infrastructure spending. Meanwhile, Engineered Structures should continue to see healthy demand from increased spend on electrical transmission, telecom, and traffic infrastructure.”

Wall Street maintains a cautiously optimistic outlook on the stock. The Moderate Buy consensus rating is based on 1 Buy and 2 Holds. The average analyst price target of $68.50 implies upside potential of about 19% to current levels. Shares have gained about 33% over the past year.

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