DA Davidson adjusted its valuation work on Construction Partners Inc. (NASDAQ: ROAD), increasing the firm’s price target to $130.00 from $120.00 while continuing to carry a Neutral rating on the stock. The research note referenced company guidance and first-quarter results as the primary inputs behind the change.
InvestingPro data cited in the research shows Construction Partners is trading at a price-to-earnings ratio of 57.9, a level the note characterized as well above typical measures of fair value for the construction sector. Despite that elevated multiple, DA Davidson modestly lifted its estimates in response to company developments.
The firm pointed to management’s apparent increase in guidance as evidence of continued confidence in the business, even after a quarter that featured slower organic growth. The analyst also flagged potential weather-related challenges that could affect second-quarter results, but indicated these considerations are not expected to derail the company’s initial outlook for fiscal 2026.
Market performance is cited as part of the backdrop for the revised target. Construction Partners has returned 51.12% over the past 12 months and 36.63% over the last six months, figures DA Davidson noted when explaining its decision to lift the price objective yet maintain a Neutral stance.
DA Davidson’s note identified several near-term areas for investors to monitor: legislative activity in Washington that could affect public-sector work, trends in organic growth and bookings, and merger and acquisition activity. Each of these items is listed as a focal point for assessing how the company tracks against its fiscal 2026 expectations.
On the company’s reported results for the first quarter of fiscal 2026, Construction Partners posted an earnings per share of $0.31, ahead of the $0.29 analysts had expected. Revenue for the quarter was $809.5 million, topping the projected $740.1 million. Even with those beats, the stock fell in pre-market trading following the announcement.
Overall, DA Davidson’s action reflects a calibrated response to better-than-forecast financials and management guidance increases, counterbalanced by an elevated valuation and near-term execution risks highlighted by the firm.
Key points
- DA Davidson raised its price target on Construction Partners to $130 from $120 but kept a Neutral rating, reflecting a balanced view on the stock.
- Construction Partners reported Q1 EPS of $0.31 versus $0.29 expected and revenue of $809.5 million versus $740.1 million expected, prompting modest estimate increases.
- Areas to watch include legislative developments, organic growth and bookings trends, and merger and acquisition activity; sectors impacted include construction, infrastructure, and related equity markets.
Risks and uncertainties
- Weather-related disruptions could weigh on near-term operating results, particularly in the second quarter - this affects construction and heavy civil sectors.
- Elevated valuation metrics - a P/E of 57.9 - may limit upside and increase sensitivity to execution setbacks in equity markets.
- Legislative developments in Washington and M&A activity create uncertainty around future public-sector demand and strategic outcomes for the company, influencing the infrastructure and construction markets.