Summit's (SUM) TRA to Streamline its Corporate Structure
Summit Materials, Inc. SUM entered into an agreement with few of the Blackstone Inc. BX affiliates for its subsidiary, Summit Materials, LLC, to acquire all the rights and interest of each of the Blackstone Tax Receivable Agreement (TRA) Parties. This was stated in the TRA, dated Mar 11, 2015, which was drafted by and among Summit, the Blackstone TRA Parties and few other parties.
Summit stated that it has eliminated an estimated amount of $256 million in TRA payments payable to Blackstone between the years 2024 and 2039. This step was undertaken in exchange of an aggregate cash consideration of $115 million. Currently there is a gross obligation of approximately $72 million under the TRA which the company will pay out to the responsible parties under similar agreement terms.
As per the agreement, the company is liable to pay pre-IPO owners 85% of cash savings, if any, realized in the U.S. federal, state and local income tax. Post the agreement, Summit can realize all the cash savings (if any) as a result of its tax attributes related to the interests obtained from the Blackstone TRA Parties.
The company is optimistic about the TRA initiation as it believes this will help it to monetize tax benefits effectively, mitigate future obligations and streamline its corporate structure.
Summit’s Focus on Growth
Summit is focusing on accelerating its growth through various accretive initiatives, one of which is acquisitions. The buyout strategy helps the company gain growth opportunities in new as well as existing markets and broaden its product portfolio.
In the fiscal second quarter of 2023, the company completed three acquisitions, which include two pure aggregates acquisitions that will richen its portfolio mix and make it more materials-led, reflecting exposure expansion in the existing market and the acquisition of Arizona Materials, which is an integrated construction materials supplier with leading position in the Phoenix metro market.
Furthermore, the company’s sustainable pricing momentum for all its line of business and local markets, along with enabling enterprise-wide social responsibility initiatives, have led to solid profitability growth.
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Shares of SUM have gained 16% in the past three months outperforming the Zacks Building Products - Concrete and Aggregates industry’s 12.9% growth.
Zacks Rank
Summit currently sports a Zacks Rank #1 (Strong Buy).
About Blackstone
Blackstone is an American-based alternative asset management company, which serves both institutional as well as individual investors. In July 2023, the company reached $1 trillion in assets under management, marking 6% year-over-year growth. Furthermore, the company’s brand presence and persistent efficiency in performance position it well to grasp profit growth in the upcoming period.
The company currently carries a Zacks Rank #3 (Hold). BX delivered a trailing four-quarter earnings surprise of 5.7%, on average. The Zacks Consensus Estimate for BX’s 2023 sales and earnings per share indicates decline of 16% and 19.5%, respectively, from the previous year’s reported levels.
Other Key Picks
Some other top-ranked stocks from the Construction sector are EMCOR Group, Inc. EME and TopBuild Corp. BLD.
EMCOR currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
EME delivered a trailing four-quarter earnings surprise of 17.2%, on average. Shares of the company have risen 79.3% in the past year. The Zacks Consensus Estimate for EME’s 2023 sales and earnings per share indicates growth of 11.5% and 35.9%, respectively, from the previous year’s reported levels.
TopBuild currently sports a Zacks Rank of 1. BLD delivered a trailing four-quarter earnings surprise of 14.1%, on average. Shares of the company have risen 48.5% in the past year.
The Zacks Consensus Estimate for BLD’s 2023 sales and earnings per share indicates growth of 3.3% and 6.1%, respectively, from the previous year’s reported levels.
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