Advanced Drainage Systems' (WMS) fiscal 2027 outlook was largely as-expected despite soft macro and resin inflation, with management guiding to flat volumes, with price offsetting material inflation on a dollar-for-dollar basis, RBC Capital Markets said in a note emailed Friday.
There was a lot of focus on the fiscal 2027 guidance given the headwinds from higher plastic resins and freight costs, as well as the secondary impact of elevated oil prices on inflation and rising interest rates, the brokerage said.
RBC lowered its fiscal 2027 and 2028 earnings per share estimate by $0.15 and $0.35, respectively.
Residential demand is likely to remain volatile, declining by mid-to-high single digits due to prevailing interest rates and sluggish land development, though management expects to outgrow the market with new products and distributive wins, according to the note.
Non-residential and infrastructure demand should remain flat or grow by low single digits, while agriculture faces double-digit declines, resulting in flattish volume growth in fiscal 2027, the brokerage said.
RBC kept an outperform rating on Advanced Drainage Systems and lowered the price target to $168 from $175.
Price: $132.07, Change: $-3.08, Percent Change: -2.28%