Monday 22 October 2018

CRH sell-off 'overdone' as Davy upgrades earnings outlook

Photo: PA
Photo: PA
John Mulligan

John Mulligan

A sell-off in CRH shares amid concerns about acquisitions, including that of Ash Grove, has been overdone, according to Davy Stockbrokers.

It has raised its earnings forecasts for CRH by 2pc.

Davy has predicted that CRH will generate earnings before interest, tax, depreciation and amortisation (ebitda) of €3.57bn next year. That compares to the record €3.2bn ebitda that the group expects to make this year.

Davy noted that CRH's shares have struggled recently after it entered the fray to buy South African cement maker PPC. Investors fretted about synergies, and questions were raised about its agreed acquisition of US cement maker Ash Grove for $3.5bn (€3bn). Shares in CRH, which is Ireland's biggest company, were 1pc lower yesterday before the close at €29.33. They were trading at more than €34 in May.

"These issues look exaggerated, as does the share price decline," noted Davy analysts Robert Gardiner and Barry Dixon in a research report yesterday.

"Nothing has really changed with the investment case," they added. "Our positive recommendation is based on CRH's European recovery potential, exposure to US end-markets and opportunistic M&A - all of which remain very much intact."

So far this year, CRH has paid €1.34bn for 27 acquisitions or investment transactions.

Irish Independent

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