Core & Main broke out of a cup base this week and is today's selection for IBD 50 Stocks to Watch.
The growth stock topped the 26.73 buy point Wednesday in strong volume. But on Thursday it pulled back and closed below the entry. Light volume Thursday suggested this is a normal pullback.
On April 12, shares rebounded above the 50-day moving average in strong volume after news of a secondary offering of 5 million shares from shareholders. The company also announced it plans to repurchase over 9 million shares from existing shareholders. The company also plans on buying partnership interests in its subsidiary, Core & Main Holding.
The Relative Strength Rating is also near a 52-week high, according to IBD MarketSmith chart analysis.
Strong Quarterly And Full Year Earnings
January-quarter sales of $1.3 billion grew 10% while earnings per share of 31 cents were up 11% from a year ago. That may not seem like growth-stock performance, but the company's longer-term growth is better.
For the full fiscal year, sales of $6.6 billion were up 32.9% from 2021. Earnings per share of $2.13 were nearly four times higher than the previous year's 55 cents.
For the current fiscal year, growth is moderating. The company expects net sales to range between $6.4 billion to $6.8 billion.
The growth stock has an impressive Composite Rating of 98 and an EPS Rating of 96. The Relative Strength Rating of 91 is also a show of strength. CNM ranks third in the building products industry group, which ranks 22nd among IBD's 197 industry groups.
Core & Main provides water, wastewater, storm drainage and fire protection products and services across 300 locations in the U.S. The St. Louis, Mo.-based company recently acquired two companies, bringing the total acquisitions in 2022 and 2023 to eight companies, altogether bringing $175 million in annualized sales.
The two recent buys include Midwest Pipe Supply, a distributor of drainage and waterworks in Iowa, and UPSCO, which provides meter sets, pipes, valves and other equipment to utilities and contractors.
Infrastructure Spending Tailwind For Growth Stock
The growth stock is poised to benefit from the Infrastructure Investment and Jobs Act and its $48.4 billion provision for water and wastewater management.
CEO Steve LeClair finds the company "well positioned to capitalize on municipal infrastructure tail winds, particularly as water utilities begin to accelerate repair and replacement work supported by the federal infrastructure bill."
The executive also expects "to continue driving above-market growth and gaining market share through product, customer and geographic expansion initiatives."
Core & Main shares started trading on the NYSE in July of 2021 at 20 per share, which valued the enterprise at $7 billion.
The stock has a sound Accumulation/Distribution Rating of A-. Fund ownership has grown over the past seven quarters. Mutual funds own 35% of shares outstanding.
Exchange traded funds own the stock as well. The iShares Russell 1000 ETF and the Schwab U.S. Broad Market ETF hold shares of Core & Main.
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