-- Advanced Drainage Systems' (WMS) recent stock price drop is a "solid" buying opportunity as it continues to maintain key competitive advantages in its sector with the capability to handle inflation and demand challenges, Oppenheimer said, noting shares have fallen about 16% since the onset of the Iran conflict versus a 2% gain for the S&P 500.
The company needs to boost prices by mid-single-digits in order to offset higher resin costs, with high-density polyethylene and polypropylene making up 35% to 40% of cost of goods sold and transport adding around 15%, the brokerage said in a Thursday note.
The investment firm added that Advanced Drainage Systems' structural advantages and higher prices will drive improving margins over time.
Oppenheimer said it expects demand trends to remain choppy into fiscal 2027, with stable non-residential activity and residential construction remaining a key watch point. The recently closed acquisition of National Diversified Sales is set to enhance scale, broaden product offerings and be accretive to earnings in the first year.
The company's current stock price and upside to EPS and free cash flow, anticipated to accelerate in fiscal 2027 and 2028, support expectations of the shares outperforming the market moving forward, according to the note.
Oppenheimer kept the company's stock rating at outperform and cut its price target to $195 from $200.
Price: $153.10, Change: $+8.78, Percent Change: +6.08%