CNM Q1 Earnings Call: Market Share Gains and Steady Infrastructure Demand Shape Outlook
Water and fire protection solutions company Core & Main (NYSE:CNM) beat Wall Street's revenue expectations in Q1 CY2025, with sales up 9.8% year on year to $1.91 billion. On the other hand, the company's full-year revenue guidance of $7.7 billion at the midpoint came in 0.6% below analysts' estimates.
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Revenue: $1.91 billion vs analyst estimates of $1.85 billion (9.8% year-on-year growth, 3.5% beat)
Adjusted EBITDA: $224 million vs analyst estimates of $225 million (11.7% margin, in line)
The company reconfirmed its revenue guidance for the full year of $7.7 billion at the midpoint
EBITDA guidance for the full year is $975 million at the midpoint, below analyst estimates of $982.9 million
Operating Margin: 8.9%, in line with the same quarter last year
Organic Revenue rose 4.8% year on year (2.7% in the same quarter last year)
Market Capitalization: $11.02 billion
Core & Main's first quarter results were shaped by steady municipal infrastructure demand, continued share gains, and resilient activity in nonresidential construction. Management pointed to above-market growth in its smart meters and storm drainage products, as well as the benefits of recent product and geographic expansion initiatives. CEO Mark Witkowski emphasized the importance of local relationships and a diversified product mix, stating, 'We drove 10% growth in meters and growth well into the double digits in our treatment plant and fusible high-density polyethylene offerings.' While residential lot development started the year with healthy activity, management acknowledged the segment is showing early signs of softening due to affordability pressures and cautious developer spending.
Looking forward, Core & Main's guidance reflects a stable but uncertain environment, with management citing tariff risks, inflation, and interest rates as key variables for the remainder of the year. CFO Robyn Bradbury noted, 'We have good visibility into demand through the next quarter and expect to finish the first half strong supported by healthy project activity and backlogs,' but flagged less clarity for the back half of the year. Management expects flat to slightly positive pricing trends and is focused on passing through supplier cost increases, while also pursuing margin improvement through private label expansion and sourcing initiatives. Investments in greenfield branches and bolt-on acquisitions remain central to the company's growth strategy.
Management attributed first quarter performance to municipal infrastructure funding, strong nonresidential demand, and share gains in targeted product categories. Expansion initiatives and disciplined pricing also played a significant role.
Municipal project momentum: Ongoing funding from the Infrastructure Investment and Jobs Act (IIJA) supported growth in water and wastewater projects, especially in treatment plants, transmission line replacements, and stormwater management. Management cited a growing pipeline of shovel-ready municipal projects that contributed to steady demand in Q1.
Nonresidential segment stability: While commercial buildings and manufacturing remained soft, Core & Main saw solid sales into data center construction, institutional buildings, multifamily housing, and road and bridge projects. The company's diversified exposure provided a buffer against weaker categories, and bidding activity across nonresidential segments was described as healthy.
Smart meter and storm drainage growth: The company achieved 10% growth in smart meter sales (on top of strong prior-year results) and 17% growth in storm drainage, driven by both organic initiatives and M&A. Management attributed storm drainage strength in part to road and bridge projects and changes in product acceptance at the local level.
Pricing and margin discipline: Sequential improvement in gross margins was realized through disciplined pricing and ongoing efforts in private label and sourcing optimization. While tariffs have had minimal direct impact so far, management is closely monitoring supplier cost increases and has taken steps to pass on higher costs where necessary.
Local expansion and M&A: Core & Main continues to expand via greenfield branches and bolt-on acquisitions, having opened 20 greenfields since 2017 and completed over 40 acquisitions. The company emphasized the importance of local expertise in driving organic growth and indicated that its acquisition pipeline remains active.
Core & Main's guidance is shaped by expectations of flat end markets, margin expansion strategies, and ongoing uncertainty in residential and private construction.
Infrastructure funding tailwinds: Management expects continued support from federal and state funding for municipal water and wastewater projects, which should provide stability even if other construction segments soften. The company anticipates municipal demand to remain steady throughout the year.
Margin improvement initiatives: The company is focused on expanding gross margins through private label growth, sourcing optimization, and disciplined pricing. Management stated that SG&A productivity and cost-out activities are expected to further support EBITDA margin expansion, despite acquisition-related expense pressures.
Residential and macroeconomic risks: Core & Main anticipates a neutral to slightly down outlook for residential lot development, citing affordability pressures and smaller project footprints. Uncertainty around tariffs, interest rates, and inflation could dampen private construction activity and impact demand in the second half of the year.
In the coming quarters, the StockStory team will be watching (1) continued flow of IIJA funding into municipal projects and the impact on Core & Main's backlog, (2) execution of margin expansion initiatives, particularly in private label and sourcing, and (3) signals of stabilization or further softening in residential and private nonresidential construction. The pace of greenfield openings and progress on acquisition integration will also be closely tracked.
Core & Main currently trades at a forward P/E ratio of 23.4×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it's free).
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