12:49 PM EST, 03/08/2024 (MT Newswires) -- Core & Main's ( CNM ) acquisitions and volume gains warrant increased 2024 estimates ahead of the company's fiscal fourth-quarter print for the prior year on March 19, RBC Capital Markets said in a note emailed Friday.

The brokerage lifted the water, sewer and fire protection product distributor's price target to $59 from $47 and reiterated an outperform rating.

It raised 2024 and 2025 adjusted earnings before interest, taxes, depreciation and amortization estimates by 6% to $935 million and $988 million, respectively. The estimate for the current year is above the consensus' $923 million view, the report showed.

RBC analyst Mike Dahl said the stronger outlook is driven by Core & Main's ( CNM ) mergers and acquisitions strategy, notably the purchase of Dana Kepner that closed on Thursday, as well as "a slightly better core backdrop." The model also reflects the full impacts of secondary offerings and recent buybacks, with Core & Main's ( CNM ) share count declining by 3% in 2024. The company closed its acquisition of Eastern Supply in February and Lee Supply Co. in January.

"We continue to view (CNM) as one of the more compelling medium to long-term stories in our coverage, with potential upside well beyond our (price target) over the next several years," Dahl said.

Sales in 2024 are now being modeled by RBC at $7.13 billion, representing year-over-year growth of 7%, from a prior view of $6.93 billion. The average analyst estimate is for lower sales of $7.07 billion for the year ended January 2025, according to a Capital IQ survey. The increased sales target reflects a 5.5% benefit from M&A, up from 2.8% previously, driven by Dana Kepner.

Dana Kepner will add roughly $250 million in run-rate sales, which doubles RBC's 2024 year-over-year acquired sales growth rate to 6%. The brokerage is modeling stronger organic volume growth of 2% for the year, compared with 1% previously.

The company's initial guidance was for volumes to be flat to up by a low-single digit. RBC's stronger organic volume outlook reflects residential tailwinds and resilient trends in water and nonresidential that showed up in Ferguson's (FERG) fiscal second-quarter results released earlier this week, according to the brokerage. Core & Main ( CNM ) and Ferguson account for a nearly 30% share of the highly fragmented industry, RBC said.

Price: 49.92, Change: -0.20, Percent Change: -0.40