CRH: Profit Growth Exceeds Our Expectations; Raising Our Fair Value Estimate

Narrow-moat CRH reported 14% EBITDA growth during the third quarter and raised its full-year EBITDA guidance by $100 million to $6.3 billion, exceeding our expectations. Third-quarter organic revenue growth of 2% is largely in line with its European-listed peer group, however, we believe CRH is better positioned than its peers due to its material exposure to accelerating U.S. infrastructure spending. Its $2.1 billion acquisition of assets in Texas further solidifies its exposure to the faster-growing construction regions. We raise our fair value estimate by 8% to $55, incorporating fiscal 2023 EBITDA of $6.4 billion (from $6.2 billion) and structurally higher margins for the business resulting from its favorable end market exposure and recent acquisitions. Our U.K.-listed fair value estimate increases 11% to GBX 4,400, the additional 3% difference being due to currency depreciation against the U.S. dollar. Shares are trading in fairly valued territory.