Investors looking for stocks in the Building Products - Miscellaneous sector might want to consider either Jacobs Solutions (J) or Advanced Drainage Systems (WMS) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zack ...

Core Viewpoint - Advanced Drainage Systems, Inc. (ADS) plans to offer up to $500 million in senior unsecured notes due 2034, subject to market conditions [1] Group 1: Company Overview - ADS is a leading provider of innovative water management solutions in the stormwater and onsite wastewater industries [1] Group 2: Financial Offering - The company intends to commence an offering of senior unsecured notes in a private transaction exempt from registration requirements [1]

Group 1 - The core focus of Crude Value Insights is on cash flow and companies that generate it, highlighting value and growth prospects in the oil and natural gas sector [1] - Subscribers benefit from a 50+ stock model account, which provides a comprehensive analysis of cash flow for exploration and production (E&P) firms [1] - The service includes live chat discussions about the sector, fostering a community for investors interested in oil and gas [1] Group 2 - A two-week free trial is available for new subscribers, encouraging engagement with the oil and gas investment community [2]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Advanced Drainage Systems (WMS) - WMS currently holds a Momentum Style Score of A, indicating strong momentum characteristics [2] - The company has a Zacks Rank of 2 (Buy), suggesting it is positioned for potential outperformance in the market [3] Performance Metrics - Over the past week, WMS shares have increased by 15.35%, outperforming the Zacks Building Products - Miscellaneous industry, which rose by 5.98% [5] - In a longer timeframe, WMS shares have gained 23.27% over the past quarter and 37.86% over the last year, while the S&P 500 has only moved 1.86% and 15.7%, respectively [6] Trading Volume - The average 20-day trading volume for WMS is 758,640 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, two earnings estimates for WMS have been revised upwards, increasing the consensus estimate from $5.98 to $6.10 [9] - For the next fiscal year, two estimates have also moved higher, with no downward revisions noted [9] Conclusion - Given the strong performance metrics and positive earnings outlook, WMS is identified as a solid momentum pick with a Momentum Score of A and a Zacks Rank of 2 (Buy) [11]

Core Viewpoint - Advanced Drainage Systems (WMS) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Ratings - The Zacks rating system is based solely on changes in a company's earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The Zacks rating upgrade for Advanced Drainage reflects an optimistic earnings outlook, likely to positively affect its stock price [3][5]. Impact of Earnings Estimate Revisions - Changes in future earnings potential, as shown by earnings estimate revisions, are strongly correlated with near-term stock price movements [4][6]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, influencing their buying and selling decisions, which in turn affects stock prices [4]. Company Performance Indicators - For the fiscal year ending March 2026, Advanced Drainage is expected to earn $6.03 per share, unchanged from the previous year, with a 0.9% increase in the Zacks Consensus Estimate over the past three months [8]. Zacks Rating System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade to Zacks Rank 2 places Advanced Drainage in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [10].

Core Viewpoint - Investors are evaluating Jacobs Solutions (J) and Advanced Drainage Systems (WMS) to determine which stock offers better value for investment at the current time [1] Group 1: Zacks Rank and Earnings Outlook - Both Jacobs Solutions and Advanced Drainage Systems currently hold a Zacks Rank of 2 (Buy), indicating a positive earnings outlook due to favorable analyst estimate revisions [3] - The Zacks Rank is a reliable indicator for value investors as it emphasizes companies with improving earnings forecasts [2] Group 2: Valuation Metrics - Jacobs Solutions has a forward P/E ratio of 20.88, while Advanced Drainage Systems has a higher forward P/E of 29.09 [5] - The PEG ratio for Jacobs Solutions is 1.54, compared to Advanced Drainage Systems' PEG ratio of 2.26, indicating Jacobs Solutions may be undervalued relative to its expected earnings growth [5] - Jacobs Solutions has a P/B ratio of 5.07, while Advanced Drainage Systems has a P/B ratio of 7, further suggesting that Jacobs Solutions is a more attractive value option [6] Group 3: Value Grades - Based on the valuation metrics, Jacobs Solutions has earned a Value grade of B, whereas Advanced Drainage Systems has received a Value grade of D, indicating a stronger value proposition for Jacobs Solutions [6]

Core Insights - Advanced Drainage Systems (ADS) reported strong fiscal Q3 2026 results, achieving a 30.2% adjusted EBITDA margin, attributed to higher-margin products and operational improvements [4][7][10] Market Performance - Non-residential sales increased by 5%, driven by growth in the Southeast, Midwest, and Northeast regions, although the forecast for non-residential in-market demand was updated to a decline of low- to mid-single digits [1] - Residential in-market sales were slightly down, but the Infiltrator's core residential business outperformed due to new products and distribution gains [8] Revenue and Product Performance - Pipe revenue saw a slight decline, with HP pipe growth offset by weaker residential and infrastructure market sales [2] - Infiltrator revenue increased by 2%, supported by strong activity in the Southeast and South [2] - Allied Products sales rose by 8%, driven by growth in StormTech storage chambers, Nyloplast capture structures, and water quality products [3] Financial Highlights - ADS ended the period with over $1 billion in cash and updated fiscal 2026 guidance to a revenue midpoint of $3.015 billion and adjusted EBITDA midpoint of $945 million [6][15] - The company reported a 9% increase in adjusted EBITDA despite flat revenue, driven by higher-margin products and cost improvements [7][10] Acquisition and Synergies - The acquisition of NDS was completed, expected to generate $25 million in annual cost synergies by year three, with an anticipated contribution of approximately $40 million in revenue for the final two months of fiscal 2026 [11][12] - NDS will be integrated into the Allied and Other segment, enhancing ADS's stormwater and wastewater management portfolio [11] Strategic Focus - Management emphasized a strategic shift towards higher growth and higher margin products, particularly in the Allied and Infiltrator segments, aiming for a mix of 50% or better in these areas [18] - The company plans to host its third Investor Day on June 18, 2026, to discuss growth priorities, acquisition updates, and new financial targets [19]

Financial Performance - Net sales for the three months ended December 31, 2025, were $693.354 million, a slight increase from $690.538 million in the same period of 2024, while net sales for the nine months ended December 31, 2025, reached $2.374 billion, up from $2.288 billion in 2024, representing a year-over-year growth of 3.74%[13] - Gross profit for the three months ended December 31, 2025, was $259.152 million, compared to $241.594 million in 2024, indicating a gross margin improvement from 34.96% to 37.34%[13] - Operating income for the three months ended December 31, 2025, was $136.823 million, an increase from $126.864 million in 2024, reflecting a growth of 7.73%[13] - Net income attributable to ADS for the three months ended December 31, 2025, was $93.626 million, compared to $81.231 million in 2024, marking an increase of 15.5%[13] - The company reported a comprehensive income of $97.525 million for the three months ended December 31, 2025, compared to $74.068 million in 2024, representing a year-over-year increase of 31.7%[15] - Net income for the nine months ended December 31, 2025, was $394,628, an increase of 5% compared to $375,785 in 2024[18] - The Company reported a net income available to common stockholders of $93.6 million for the three months ended December 31, 2025, compared to $81.2 million for the same period in 2024, reflecting a year-over-year increase of 15.5%[51] - Basic net income per share for the nine months ended December 31, 2025, was $5.06, up from $4.81 in the same period of 2024, indicating a growth of 5.2%[51] Assets and Liabilities - Total assets as of December 31, 2025, were $4.144 billion, up from $3.690 billion as of March 31, 2025, indicating a growth of 12.3%[11] - Total liabilities increased to $2.115 billion as of December 31, 2025, from $2.055 billion as of March 31, 2025, reflecting a rise of 2.93%[11] - The company’s long-term debt obligations stood at $1.276 billion as of December 31, 2025, slightly up from $1.252 billion as of March 31, 2025[11] - Long-term debt obligations as of December 31, 2025, totaled $1.2757 billion, compared to $1.2516 billion as of March 31, 2025, reflecting an increase of 1.9%[55] Cash Flow and Management - The company’s cash position improved significantly, with cash increasing to $1.008 billion as of December 31, 2025, compared to $463.319 million as of March 31, 2025[11] - Net cash provided by operating activities increased to $779,133, up 44% from $540,264 in the previous year[18] - Net cash used in investing activities decreased significantly to $186,572 from $402,889, indicating improved cash management[18] - Cash and restricted cash at the end of the period totaled $1,010,903, a substantial increase from $494,753 in the previous year[18] - The company reported a net change in cash of $541,632, a significant improvement from a decrease of $1,095 in the previous year[18] - Cash paid for income taxes for the nine months ended December 31, 2025, was $83.411 million, a decrease from $111.420 million in the same period of 2024[76] Capital Expenditures and Investments - Capital expenditures for the period were $196,737, compared to $166,410 in the prior year, reflecting an 18% increase[18] - Capital expenditures for the three months ended December 31, 2025, totaled $85.719 million, significantly higher than $54.228 million in the same period of 2024, reflecting an increase of 58.1%[74] - The company incurred $17.7 million in restructuring expenses related to the closure of a recycling facility and other optimization efforts during the nine months ended December 31, 2025[35] - The acquisition of Orenco Systems, Inc. was completed for a total consideration of approximately $236.3 million, which includes a purchase price of $255 million net of cash acquired[39] - The company completed the acquisition of River Valley Pipe LLC for a preliminary fair value of consideration transferred of approximately $18.8 million[41] - The company completed the acquisition of National Diversified Sales (NDS) for approximately $1.0 billion on February 2, 2026, enhancing its water management business[78] Stockholder Information - Common stock dividends paid were $42,099, compared to $37,324 in the previous year, reflecting a 13% increase[18] - The Company’s common stock dividends declared were $42.1 million, equating to $0.54 per share[36] - A quarterly cash dividend of $0.18 per share was declared, payable on March 16, 2026, to stockholders of record as of March 2, 2026[77] Segment Performance - Net sales from the Pipe segment for the three months ended December 31, 2025, were $326.713 million, a decrease of 7.2% from $339.629 million in 2024[72] - The Infiltrator segment reported net sales of $152.881 million for the three months ended December 31, 2025, compared to $150.013 million in 2024, marking a growth of 1.9%[72] - Total consolidated net sales for the nine months ended December 31, 2025, reached $2.373615 billion, an increase of 3.7% from $2.288484 billion in 2024[72] - Segment Adjusted Gross Profit for the three months ended December 31, 2025, was $296.107 million, up from $275.943 million in 2024, indicating a growth of 7.3%[72] - Adjusted gross profit for the three months ended December 31, 2025, was $296.107 million, up from $275.943 million in the same period of 2024, representing an increase of 7.3%[73] Stock-Based Compensation - Stock-based compensation expense rose to $25,816, up 19% from $21,758 in the prior year[19] - The company’s stock-based compensation expense was recorded at $25.8 million for the three months ended December 31, 2025[36] - Total stock-based compensation expense for the three months ended December 31, 2025, was $8.835 million, an increase from $7.798 million in 2024, representing a growth of 13.3%[65] - For the nine months ended December 31, 2025, stock-based compensation expense totaled $25.816 million, up from $21.758 million in 2024, reflecting a year-over-year increase of 18.5%[66] Other Financial Metrics - The effective tax rate for the three months ended December 31, 2025, was 24.9%, compared to 25.0% for the same period in 2024[64] - The Company has a maximum potential obligation of $5.5 million under a guarantee for the South American Joint Venture as of December 31, 2025[54] - The Company has no outstanding purchase commitments with fixed price and quantity as of December 31, 2025[62] - The Company’s Senior Notes due 2027 and 2030 have fair values of $350.1 million and $511.8 million, respectively, as of December 31, 2025[61] - A 1.0% increase in interest rates on variable-rate debt would raise the annual forecasted interest expense by approximately $4.0 million based on borrowings as of December 31, 2025[134]

Financial Data and Key Metrics Changes - The company reported a 30.2% Adjusted EBITDA margin, marking one of the most profitable third quarters in its history [6][9] - Adjusted EBITDA increased by 9% despite flat revenue, resulting in a 250 basis points increase in the Adjusted EBITDA margin [9][10] - Year-to-date cash from operations reached $779 million, a 44% increase year-over-year, converting more than 100% of Adjusted EBITDA into cash [14][15] Business Line Data and Key Metrics Changes - Allied Products sales increased by 8%, driven by key products like StormTech storage chambers and water quality products [6][10] - Infiltrator revenue grew by 2%, with strong activity in the Southeast and South [6][10] - Pipe revenue saw a slight decline, with HP Pipe growth offset by weaker sales in residential and infrastructure markets [8][10] Market Data and Key Metrics Changes - Sales in the core non-residential market increased by 5%, particularly in the Southeast, Midwest, and Northeast [8][10] - Residential market sales were down slightly, but the Infiltrator core residential business outperformed the market due to new products [9][10] - The company updated its in-market demand forecast for the non-residential market to a decline in low to mid-single digits [8][10] Company Strategy and Development Direction - The company continues to prioritize higher growth, higher margin Allied and Infiltrator products to strengthen profitability [5][10] - The recent acquisition of NDS is expected to enhance the company's stormwater capture portfolio and improve offerings in distribution and retail channels [10][11] - The company is committed to long-term growth, focusing on innovation and new product development while navigating a challenging market environment [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategies and product portfolio to increase market participation as the residential market recovers [9][10] - The long-term outlook remains strong, supported by secular tailwinds driving demand for water management solutions across North America [13] - Management acknowledged the impact of adverse weather on construction activities, particularly in the fourth quarter [17][22] Other Important Information - The company announced a new $1 billion stock repurchase authorization, bringing the total authorization to $1.148 billion [16] - The company plans to host its Third Investor Day on June 18, 2026, to discuss growth priorities and updates on acquisitions [11][12] Q&A Session Summary Question: Non-residential market guidance reduction - Management indicated that the guidance reduction reflects a mark-to-market update based on performance in the first nine months and acknowledged the impact of recent storms on the fourth quarter [19][21][22] Question: Future product pipeline and contributions - Management noted that new products are contributing tens of millions of dollars in revenue and expect this to accelerate as commercialization improves [23][25] Question: NDS integration and cost synergies - NDS will be integrated into the Allied and Other segments, with expected cost synergies of $25 million by year three [29][30] Question: Capital expenditures outlook - The increase in CapEx outlook is due to timing rather than specific projects [33][34] Question: Infrastructure project visibility - Management reported improved quoting activity in infrastructure but noted variability by geography and project type [50][51] Question: Raw material costs and pricing - Management confirmed stable pricing and favorable material costs compared to the previous year, with ongoing monitoring of costs [79][81] Question: Margin expansion despite NDS's lower margin profile - Management attributed margin expansion to a favorable product mix and self-help initiatives implemented over the past 16-18 months [87][89]

Financial Data and Key Metrics Changes - The company reported a 30.2% adjusted EBITDA margin, marking one of the most profitable third quarters in its history [6][9] - Adjusted EBITDA increased by 9% despite flat revenue, resulting in a 250 basis points increase in the adjusted EBITDA margin [9][10] - Year-to-date, the company generated $779 million in cash from operations, converting more than 100% of adjusted EBITDA into cash, with a year-over-year increase of $239 million, or 44% [14][15] Business Line Data and Key Metrics Changes - Allied product sales increased by 8%, driven by key products such as StormTech storage chambers and Nyloplast capture structures [6][10] - Infiltrator revenue increased by 2%, with strong activity in the Southeast and South [6][10] - Pipe revenue was slightly down, with growth in HP Pipe products offset by weaker sales in residential and infrastructure markets [8][10] Market Data and Key Metrics Changes - Sales in the core non-residential market increased by 5%, driven by growth in the Southeast, Midwest, and Northeast [8][10] - The residential market saw slight declines, but the Infiltrator core residential business significantly outperformed the market [9][10] - The company updated its in-market demand forecast for the non-residential market to down low to mid single digits, compared to a previous outlook of flat to down low single digits [8][10] Company Strategy and Development Direction - The company continues to prioritize higher growth, higher margin allied and Infiltrator products to strengthen profitability [5][10] - The recent acquisition of NDS is expected to enhance the company's stormwater capture portfolio and improve offerings in distribution and retail channels [10][11] - The company is committed to long-term growth, focusing on innovation and new product development, with plans to share more details at the upcoming Investor Day [11][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategies and product portfolio to increase market participation, particularly in the residential market [9][10] - The long-term outlook for the business remains strong, supported by secular tailwinds driving demand for water management solutions across North America [13] - Management acknowledged the challenges posed by adverse weather conditions impacting construction activities, particularly in the fourth quarter [17][22] Other Important Information - The company announced a new $1 billion stock repurchase authorization, bringing the total authorization to $1.148 billion [16] - The company expects to access capital markets this year due to near-term maturities [16][65] - The integration of NDS is in the early stages, with management looking forward to discussing synergies at the Investor Day [11][30] Q&A Session Summary Question: Non-residential market guidance reduction - Management indicated that the guidance reduction reflects a mark-to-market update based on performance in the first nine months, with some regional variability impacting expectations [19][21][57] Question: Future product pipeline and contributions - Management noted that new products are contributing tens of millions of dollars in revenue, with expectations for acceleration as commercialization improves [23][25] Question: NDS integration and cost synergies - NDS will be included in the Allied and other segments, with expected annual cost synergies of $25 million by year three [29][30] Question: Capital expenditures outlook - The increase in CapEx outlook is related to the timing of asset service rather than specific projects [33][34] Question: Infrastructure project visibility - Management reported improved quoting activity in infrastructure, though visibility remains choppy [50][51] Question: Raw material costs and pricing stability - Management confirmed stable pricing and favorable material costs compared to the previous year, with ongoing monitoring of cost dynamics [80][82] Question: Margin expansion despite NDS's lower margin profile - The confidence in margin expansion is attributed to a favorable product mix and successful self-help initiatives implemented over the past 16-18 months [88][90]