Infrastructure Supercycle And Capacity Expansions Will Drive Powerful Long Term Earnings Upside

Catalysts

About Amrize

Amrize is a North American construction materials and building envelope company focused on cement, aggregates, concrete and roofing systems.

What are the underlying business or industry changes driving this perspective?

• Accelerating demand for data centers, LNG and energy infrastructure, battery and advanced manufacturing plants and large educational projects is feeding a growing backlog that, based on current conditions, should support multi year volume growth in cement, aggregates and roofing, lifting revenue and EBITDA.
• Infrastructure modernization and public spending at federal, state and local levels, combined with the need to bridge the housing gap, position Amrize to participate in a potentially extended upcycle in both new build and repair and refurbishment, supporting sustained top line growth and more resilient earnings.
• Major efficiency and capacity investments, including the Ste. Genevieve expansion, Malarkey shingles factory in Indiana, St. Constant and Exshaw cement projects and Midlothian upgrades, are set to add low cost capacity that can expand EBITDA margins as utilization rises.
• The ASPIRE synergy program, with hundreds of logistics and procurement projects underway, is expected to deliver at least 50 basis points of margin expansion from 2026, directly enhancing operating leverage and net margins even if market growth normalizes.
• Strengthening balance sheet metrics, including net leverage below 1.7 times and strong free cash flow generation, give Amrize capacity for value accretive M&A and organic growth CapEx that can support compounding of revenue and earnings per share without diluting shareholders.

Assumptions

This narrative explores a more optimistic perspective on Amrize compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Amrize's revenue will grow by 6.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 10.0% today to 16.8% in 3 years time.
• The bullish analysts expect earnings to reach $2.4 billion (and earnings per share of $3.58) by about December 2028, up from $1.2 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $1.7 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, down from 26.5x today. This future PE is lower than the current PE for the CH Basic Materials industry at 19.6x.
• The bullish analysts expect the number of shares outstanding to decline by 2.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.18%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Long-term softness in residential construction and weaker storm seasons could structurally dampen demand for shingles and repair work. This could limit the mix of higher margin residential roofing and pressure overall revenue growth and segment EBITDA margins.
• If cement demand remains only modestly recovering and pricing stays flat or declines after several years of limited increases, Amrize may face a prolonged period of negative price cost in cement. This could weigh on Building Materials revenue quality and consolidated EBITDA margins.
• Ongoing cost inflation in manufacturing, distribution and logistics, combined with temporary outages like the recent six week cement equipment failure, could become a recurring feature of a more complex network. This could lead to structurally higher operating costs and lower net margins.
• Rising competitive intensity in commercial roofing from distributor consolidation and potential new manufacturing entrants could erode Amrize's pricing power over time. This could slow system price increases and compress Building Envelope earnings.
• Higher for longer interest rates, tariff uncertainty and delayed project start decisions by commercial customers could extend the current backlog of sidelined projects. This could mute the release of pent up demand and constrain volume driven revenue and earnings growth over the next several years.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Amrize is CHF62.08, which represents up to two standard deviations above the consensus price target of CHF48.64. This valuation is based on what can be assumed as the expectations of Amrize's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF65.32, and the most bearish reporting a price target of just CHF40.66.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $14.4 billion, earnings will come to $2.4 billion, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 5.2%.
  
• Given the current share price of CHF44.92, the analyst price target of CHF62.08 is 27.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.