Arcosa (ACA) Q2 EPS Jumps 40%

Core Insights - Arcosa reported a record non-GAAP EPS of $1.27, exceeding analyst expectations of $1.05, while GAAP revenue was $736.9 million, below the consensus estimate of $754.2 million [1][2] - The company achieved a non-GAAP Adjusted EBITDA margin of 20.9%, reflecting successful integration of the Stavola acquisition and operational improvements [1][9] - Despite strong earnings growth, organic sales growth showed softness in certain areas, particularly in construction products [1][5] Financial Performance - Non-GAAP EPS increased by 39.6% year-over-year from $0.91 in Q2 2024 [2] - GAAP revenue grew by 10.9% year-over-year from $664.7 million in Q2 2024 [2] - Adjusted EBITDA rose to $154.2 million, a 36.8% increase from $112.7 million in Q2 2024 [2] - Free cash flow turned positive at $39.2 million, compared to a negative $6.1 million in Q2 2024 [2] - Adjusted EBITDA margin improved by 3.9 percentage points from 17.0% in Q2 2024 [2] Business Overview - Arcosa operates in construction materials, engineered structures, and transportation products, with a focus on infrastructure markets [3] - The company has significant positions in natural and recycled aggregates and engineered steel structures for power delivery and renewable energy [3] Strategic Focus - Recent strategic initiatives include acquisitions to accelerate growth, alignment with infrastructure spending, and managing raw material price volatility [4] - The $1.2 billion Stavola acquisition has been pivotal in expanding Arcosa's aggregates platform, particularly in the northeast U.S. [4] Segment Performance - The Construction Products segment saw a revenue increase of 28%, with the Stavola acquisition contributing $90.3 million [6] - Engineered Structures revenue grew by 7%, driven by demand for electric grid infrastructure and wind energy [7] - The Transportation Products segment reported an 18% revenue increase, supported by higher tank barge deliveries [8] Future Outlook - Management revised FY2025 revenue guidance to between $2.85 and $2.95 billion, and adjusted EBITDA to range from $555 to $585 million [10] - The company aims to reduce its net debt to adjusted EBITDA ratio below 2.5x within the next three quarters [10] - Strong backlog in utility structures supports visibility for the engineered structures segment, while federal infrastructure spending underpins demand for aggregates [11]