CRH is on the acquisition trail

CRH had a strong set of first-half numbers and the company’s empire building continues.        

Source: Bloomberg

CRH will report its third-quarter trading update on 19 November, and the announcement will be carefully watched ahead of the full-year figures. The building materials supply company will report its annual results in February 2016. Traders are expecting revenue of €23.18 billion and adjusted net income of €854 million, and these forecasts represent a 22% increase in revenue and a 46% rise in adjusted net income.

The firm will report its second-half numbers on the same date, and analysts are anticipating revenue of €12.39 billion and adjusted net income of €743 million. This compares with the first-half revenue and adjusted net income of €9.37 billion and €31.1 million respectively. 

CRH is expanding, both in terms of operations but also in earnings. The company’s first-half update showed an increase in revenue and profits, and it also included details of its acquisition of CR Laurence, which is a US-based glazing products supplier.

The takeover proves that CRH is still keen to expand its empire as it acquired €6.5 billion worth of assets that Lafarge and Holcim were forced to sell because of their merger. CRH is now the third-largest building materials supply company in the world by market capitalisation.

The company derives the majority of its profits by acquiring standalone businesses and incorporating them into the CRH model, and it looks likely that the company will stay on the acquisition trail.

Equity analysts are very bullish on CRH, and out of the 25 recommendations, ten are buys, 11 are holds, and four are sells. The average target price for the London listing is £20.11, which is 12.7% above the current price. The average target price for the Dublin listing is €27.69, which is 9.3% above the current price.

Investment banks are also bullish on HeidelbergCement, and out of the 30 ratings, 17 are buys, ten are holds, and three are sells. The average target price is €79.11, which is 11% above the current price. 

CRH (LSE) has been channeling higher over the past month and a half, as the stock seeks to recover from the September selloff which saw shares lose 15% over a three-week period. This share has been a particularly choppy one over the years and despite exhibiting clear trends, they have typically seen significant swings in the process.

The existence of lower highs and lows over the past three months has brought the idea of a more protracted pullback into view and thus there is a possibility that we could see further selling come back into play below £19.79. A close below £17.35 would provide a signal that the selling looks set to resume, with £16.85 and £16.60 the next support levels to watch.

However, the failure to break below £16.60 in early October has since provided a base for this upward channel and it is expected to resume as long as new highs and higher lows are created. Thus a move back towards £18.83 seems likely in the short term.

CRH (ISEQ) is similarly trending higher, throughout October and November, following on from a selloff throughout August and September. The continued creation of new highs and higher lows points towards a break back towards the €26.46 resistance in the near term.

The ability to close back above that level would point towards further gains, with €27.32 and €28.32 the next major levels. However, should price fall below the €24.58 level, this could be the spark needed to set CRH off on another move lower, where €22.69 and €22.39 represent the main support levels.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts