Arcosa, Inc. (NYSE:ACA) is a mid sized engineering and construction firm based in Dallas, Texas. It is a diversified construction materials and products company that sells items such as aggregates, tower structures, and steel components for vehicles.
Arcosa, Inc. (NYSE:ACA)'s business, which is geared solely towards construction products makes the firm sensitive to high interest rates as they depress construction activity and real estate performance. Consequently, the fact that its shares have risen 22% over the past twelve months is unsurprising. Equally unsurprising is the fact that Arcosa's stock soared by 4.6% the day Fed Chairman Jerome Powell confirmed that interest rate cuts would start soon. This suggests pent up momentum for the stock, and Arcosa, Inc. (NYSE:ACA) could benefit if construction activity picks up.
Additionally, since it is an American company, the firm could also see tailwinds from government spending through the Bipartisan Infrastructure Act. Oppenheimer believes that Arcosa, Inc. has "well-established positions in attractive markets with favorable long-term demand drivers, which should provide it with compelling organic and acquisition opportunities."
Arcosa's management touted the benefits of a recent acquisition during the Q2 2024 earnings call:
"It’s a very, very stable market. When you look at the financials over a long period of time, are very stable, with high margins, a very good market. This company has done a great job expanding over the last several years. And there are opportunities to consolidate not only in the main market of the New York, New Jersey area, but they also have other quarries around it. So there are opportunities. One thing that’s very interesting when you look at the competitors in the region, you have many of the big guys around it, which is something we like. We like to compete against some of the larger peers. But there are also some smaller bolt-on opportunities for the future. As I said before, our priority right now is deleveraging, and that’s going to be our focus.
And there are opportunities to grow organically, and implement some other actions to improve efficiency, et cetera. But also to learn from this company. This company has done a fantastic job and there are things we can bring to them, but there are also things we can learn from them. So very excited about it."
Overall ACA ranks 16th on our list of Oppenheimer's favorite stocks for the next 12 months.
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