SUM - Summit Materials: Diversified But Lacking Upside
2024-04-17 17:13:36 ET
Summary
- SUM’s revenue has grown well (CAGR: +8%), driven by M&A, asset acquisitions, and infrastructure spending fueling commodity prices.
- The company is heavily diversified, with the production of a range of commodities, limiting its exposure to particular markets and price movements.
- Management’s strategy could deliver margin improvement in the coming years, albeit exposure to asset prices and global demand could be impacted by China.
- SUM is not performing overly well relative to its peers, with lower margins and growth.
- We do not believe SUM is attractively priced, with a low FCF yield and near-term downside risk due to declining asset prices and negative volume growth.
Introduction and thesis
Summit Materials ( SUM ) is a leading vertically integrated construction materials company that produces and supplies aggregates, cement, ready-mix concrete, asphalt, and paving services to the construction industry. The company operates a network of quarries, cement plants, and distribution facilities across the United States and Canada.
SUM is a quality business, owing to its diversified business model and direct exposure to the US infrastructure industry, which should see healthy growth in the coming years as investment is made across a number of segments....
Summit Materials: Diversified But Lacking Upside