Amrize's NYSE Listing Will Unlock New Value And Access To US Capital Markets

Key Takeaways

• Holcim's strategy of unlocking value through Amrize's NYSE listing and margin expansion via branded solutions predicts strengthened revenue and operational focus.
  
• Investment in M&A, decarbonization, and sustainable building solutions positions Holcim for long-term growth, leveraging enhanced geographical presence and market expansion.
  
• Exchange rate fluctuations, project delays, dependency on external factors, inflation, and restructuring costs could pressure Holcim's revenue, margins, and growth prospects.

Catalysts

Operates as a building materials and solutions company worldwide.

• The planned listing of Holcim's North American business, Amrize, on the New York Stock Exchange is expected to unlock new value and access to U.S. capital markets, potentially improving valuations and financial growth through strategic separation and focus. This could positively impact revenue and operational focus in the North American segment.
  
• Continued margin expansion through branded solutions such as ECOPact and ECOPlanet reflects Holcim's successful differentiation strategy. These solutions are capturing a larger share of sales, indicating potential for sustained revenue growth and improved net margins as higher-margin products increase in the revenue mix.
  
• Ongoing M&A activity with 27 transactions in 2024 has strengthened Holcim's geographical footprint and expanded its Solutions & Products offering, which can drive future revenue growth and possibly yield higher earnings due to synergies and expanded market presence.
  
• Holcim's investments in decarbonization and circular construction—backed by public funding such as the EU Innovation Fund—position the company advantageously in sustainable building solutions, which are expected to drive future profitable growth and enhance earnings.
  
• The strong growth outlook in Lat Am and AMEA regions, driven by infrastructure and commercial investments, is expected to provide sustained revenue growth and net income improvement, particularly given the high profitability and growth witnessed in these regions.

Holcim Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Holcim's revenue will grow by 4.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.1% today to 13.0% in 3 years time.
• Analysts expect earnings to reach CHF 4.0 billion (and earnings per share of CHF 7.07) by about March 2028, up from CHF 2.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.9x on those 2028 earnings, down from 18.9x today. This future PE is lower than the current PE for the GB Basic Materials industry at 18.9x.
• Analysts expect the number of shares outstanding to decline by 1.01% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 4.63%, as per the Simply Wall St company report.

Holcim Future Earnings Per Share Growth

Risks

• The ongoing appreciation of the Swiss franc has negatively impacted Holcim's EBIT, which could continue to affect revenue and earnings if exchange rates remain unfavorable.
  
• Holcim faces potential delays in the execution of infrastructure projects in North America due to administrative changes and bureaucratic processes, which could impact future revenue growth.
  
• The dependency on external factors such as EU funding for decarbonization projects and the availability of waste materials like slag and fly ash might pose risks to sustainable growth and margin expansion.
  
• High inflation in key markets may necessitate significant price increases, which could result in competitive pressure and impact net margins if not managed effectively.
  
• The spin-off of Amrize and related restructuring could incur substantial costs, creating short-term financial strain or necessitating reallocation of capital, affecting earnings and net margins.

Valuation

• The analysts have a consensus price target of CHF95.114 for Holcim based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF111.0, and the most bearish reporting a price target of just CHF72.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF30.5 billion, earnings will come to CHF4.0 billion, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 4.6%.
  
• Given the current share price of CHF98.54, the analyst price target of CHF95.11 is 3.6% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.