Net sales forecasted for Advanced Drainage Systems are likely to slip as bad weather grips much of the United States into early March, delaying construction projects using the Hilliard, Ohio-based company's corrugated pipe.
ADS officials announced March 3 that projected net sales of $1.19 billion to $1.2 billion for the 2015 fiscal year may fall short of previously issued guidance for the publicly traded manufacturer of waste management products.
Sales guidance had been $1.2 billion to $1.25 billion, with earnings before interest, taxes and amortization of $165 million to $170 million. EBITDA guidance was lowered to $156 million to $160 million.
Blame any adverse financial impact on Old Man Winter, according to ADS Chairman and CEO Joe Chlapaty.
“Fundamentally, our business remains strong and we continue to gain market share from traditional materials and take advantage of recovery in our end markets. However, the recent weather conditions have delayed construction starts or completion across several of our geographies,” Chalapty said in statement.
Construction projects in both northern and some southern areas came to a standstill because of unexpected and prolonged inclement weather going back to the last half of February and into early March, the company said.
ADS makes high density polyethylene pipe, fittings, filters and chambers for non-residential, residential, agricultural and infrastructure uses. Company officials indicated during a third quarter conference call on Feb. 5 that weather and commodity inflation were weakening financial results.
Despite top line growth and modest selling, general and administrative expenses, both sales and profitability missed expectations, financial analyst Stephen Kim of Barclays Research, which is part of Barclays Bank PLC, noted in a report after the call.
In his research report, Kim maintained the overweight rating and raised the target price on ADS to $29.
ADS marks its one-year anniversary as a publicly traded company under the ticker name WMS on July 25. Since then it has traded as high as $27.61 and as low as $14.74. The price was up 10 cents to $27.31 at 2:50 p.m. Wednesday.
Kim updated the earnings estimates to $0.64, which is down from $0.75 for fiscal year 2015, and increased the estimates to $1.17 and $1.41, respectively, for the 2016 and 2017 fiscal years.
The analyst noted that the drivers for the missed expectations don't affect the company's long-term outlook, the sales lost due to bad weather is likely to be recovered in the next few quarters. He added that third quarter resin challenges, when the company saw a 14 percent increase in raw material prices, reversed in December and should benefit ADS in the calendar year.