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U.S. Concrete- A "Solid" Idea

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U.S. Concrete (USCR) recently said net sales and adjusted EBITDA in Q1 were likely $334 million and $34 million, respectively, and that it expects to report a net loss of $3 million for the period, notes Taesik Yoon, growth stock expert and editor of Forbes Investor.

These preliminary results are above the $322 million in sales and $31.2 million in EBITDA analysts had been projecting and also imply an adjusted net loss well under their 24 cents per share consensus estimate. 

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This suggests that the company’s operations fared well for most of the quarter prior and probably didn’t see much material impact from the strain on the U.S. economy being placed by the quarantine and social distancing measures put in place by federal and state governments to contain the spread of the coronavirus pandemic until well into March.

Given this better-than-expected Q1 performance, we’re actually surprised by the stock’s weakness following its earnings report. 

When combined with the fact that USCR’s stock had already tumbled more than 44% from where it closed on the day that the company originally offered its full-year guidance and is down by nearly 60% year-to-date, we find it hard to believe that this expectation wasn’t already priced in from a valuation standpoint.

What’s more, USCR also provided an updated to its post-COVID-19 liquidity situation, which we view as quite positive. 

Specifically, the company entered into a new five-year $180 million delayed draw term loan facility with Bank of America. The highly flexible structure of this facility — which also doesn’t contain any financial maintenance covenants — allows USCR to draw incrementally on it as needed. 

Coupled with the $40.6 million in cash it entered the year with and the fact that there are no near-term debt maturities, the company believes it has the financial resources to proactively manage its business through this challenging environment. We do as well. 

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More importantly, as we expect that to remain the case when USCR provides what is sure to be a more thorough post-COVID-19 update at the time it formally reports Q1 results on May 5 — which should only serve to further allay any liquidity concerns — its stock isn’t likely to stay down for long in our view.

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