Davy Stockbrokers ups earnings forecast for CRH

CRH is expected to post earnings of €3.1bn and €3.3bn for this year and next, respectively, after having reported earnings of €2.2bn last year.

Davy Stockbrokers has upgraded its forecasts for the building materials giant, having previously predicted respective annual earnings of €3.03bn and €3.23bn.

CRH is due to publish its first half 2016 figures on August 25. Last month, the group upgraded its own half-year earnings guidance from €1bn to €1.1bn.

CRH’s share price closed up by 1.24%, yesterday, at a year high of €27.79. The lowest it’s been in the past 12 months is €19.38.

Davy’s latest report puts a €32 price target on the CRH stock, with its industrials team saying the combination of recent high profile acquisitions, the recovery of its legacy businesses in Europe and the Americas, and its strong financial strength and track record make for “a strong investment case”.

Much of Davy’s optimism surrounds CRH’s Americas Materials business.

“Our analysis suggests that the improvement in the division has far from run its course,” Davy said.

“We believe there is still significant spare capacity with which to generate higher margins and returns. Likewise, the pricing dynamics in the division remain favourable, particularly in aggregates but also in asphalt.

“We find the group has significant competitive advantages in asphalt due to price escalators, winter-fill storage and its increased use of recycled asphalt. The combination of these factors continues to underpin a strong investment case.”

It added that Europe, as well as the Americas, likely contributed to CRH’s recent first half guidance upgrade.


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