Joe Brennan: CRH analysts play catch-up as Wall Street braces for rare earnings miss

The honeymoon is over for CRH chief executive Jim Mintern. Shares in the building materials and solutions giant jumped more than 40 per cent from the start of his tenure early last year to an all-time high of $131.55 in early January – valuing the business at almost $88 billion (€78 billion). The rally was fuelled by Mintern’s strategy, unveiled last September, which pledged $40 billion in investment and shareholder returns over five years, alongside annual revenue growth of 7-9 per cent and higher profit margins. Anticipation of the company joining the prestigious S&P 500 index late last year also boosted sentiment, as did a consistent buyer of its shares: CRH itself.CRH spent $1.2 billion buying back and cancelling its own stock in 2025. It brought the total spent under a repurchase programme that started under Mintern’s predecessor, Albert Manifold, in 2018 to $9.6 billion. READ MOREHowever, the group’s stock has slumped by 40 per cent from those January highs to a low of $78.60 on Wednesday on the New York Stock Exchange, where it moved its main listing two years ago. North America accounted for more than 70 per cent of its earnings before interest, tax, depreciation and amortisation (Ebitda) last year. Consensus analysts’ earnings forecasts have trended lower over the course of the year as the Middle East crisis has driven up fuel costs and had a knock-on impact on US house building. CRH’s energy costs surged more than 17 per cent in the second quarter and were running at an annualised $2.33 billion. The conflict has also sent mortgage rates higher, compounding the affordability problems that were already weighing on US house building. The average rate on a 15-year fixed-rate mortgage now exceeds 6.7 per cent, up from 5.5 per cent a year ago, according to Freddie Mac, the government-backed mortgage finance company.With CRH due to unveil its latest quarterly results on October 29th, a number of analysts are beginning to contemplate something rare: an earnings miss from a company with a strong reputation for delivering on its guidance.Microsoft president Brad Smith: Ireland 'well-positioned for future of AI'Taking a red pen in recent weeks to his forecasts for a host of US construction materials groups, Truist Securities analyst Keith Hughes now sees CRH’s Ebitda coming in at $7.87 billion. While that would mark 2.5 per cent growth on 2025, it would come in below CRH’s own forecast of a figure between $8.1 billion and $8.5 billion. “The cut at CRH is particularly notable given a long history of hitting numbers, but we now see the possibility of an estimate range reduction,” Hughes warned. He’s not alone. Shane Carberry of Goodbody, one of the group’s corporate brokers, recently shaved 3 per cent off his Ebitda estimate and now sees it coming in at $7.99 billion. Still, the consensus among analysts, for now, is that CRH will achieve the lower end of its guidance. Jefferies analysts have said CRH faces “a significant effort” to reach that lower end of its full-year target as cost inflation continues apace. But, for now, they reckon that acquisitions “may bridge the gap”. Under Manifold, CRH transformed through a series of large acquisitions – and, as importantly, divestments of unwanted assets – from being a business that essentially crushed big rocks into cement, aggregates and asphalt to become a vertically integrated leading infrastructure player in North America. Mintern has sharpened CRH’s focus even more on what he calls three mega-trends: continuing investment in the transport system, from roads to airports; a need to develop water management; and the re-industrialisation of the US.AI data centres are among the hottest re-industrialisation plays, with the Trump administration placing them at the heart of America’s industrial revival – betting that they will power the factories of the future and give the US a competitive edge.Mintern said on a call with analysts in July that CRH was active on 200 data centre projects, with 85 per cent of all current construction in this area within 25 miles of one of the group’s locations. [ CRH to buy aggregates operations in Denmark and FinlandOpens in new window ]The world’s largest five hyperscalers – large-scale cloud computing and technology companies, Amazon, Microsoft, Alphabet, Meta and Oracle – are expected to spend almost $700 billion this year on US data centres, according to JP Morgan. Construction accounts for about 15 per cent of total development costs. But while the infrastructure and non-residential construction sectors accounted for more than two-thirds of CRH’s global revenues last year, 32 per cent came from house building, repair and remodelling. US home completions slumped almost 13 per cent in the first eight months of the year, according to US Census Bureau data. And data for September is due to be reported next Tuesday. With builders grappling with rising interest rates and weak demand, they’re unlikely to provide much relief. An earnings miss looks more than priced in at CRH, however. The group’s enterprise value – its market capitalisation plus net debt – stands at less than 8.8 times the bottom end of its full-year Ebitda forecast. That leaves the shares trading at a discount of more than 20 per cent to their 10-year median multiple.Truist’s new price target of $105 for the stock – after cutting its forecasts – points to about 25 per cent upside. The consensus price goal among analysts of $127 suggests more than 50 per cent. CRH is also poised to tilt further towards infrastructure with the expected completion early next year of its $8.5 billion acquisition of Dallas-based Arcosa – the biggest of more than 1,200 deals in the group’s history.The honeymoon may be over. But could delivery on the promises of the Arcosa deal woo Wall Street investors again?