Barclays keeps Advanced Drainage Systems at Overweight, raises PT to $160.

Barclays keeps Advanced Drainage Systems at Overweight, raises PT to $160.

Barclays has maintained its Overweight rating for Advanced Drainage Systems Inc. (WMS) while raising its price target to $160. The upgrade comes on the heels of the company's strong first-quarter (Q1) 2026 earnings report, which highlighted robust performance despite a challenging market environment.

Advanced Drainage Systems reported a 33.5% adjusted EBITDA margin, one of the highest in its history [1]. The company's Infiltrator segment grew by 21%, driven by Orenco's performance and double-digit organic growth in on-site wastewater tanks [1]. Domestic Allied Product Sales increased by 1%, with double-digit growth in multifamily residential market products [1].

The company's free cash flow (FCF) for the year-to-date stood at $222 million, a significant improvement from the $126 million reported in the prior year [1]. Capital expenditures (CapEx) for the first quarter were $53 million, with full-year expectations ranging from $200 million to $225 million [1]. The company maintained a strong financial position with over $1.2 billion in available liquidity and a net leverage ratio of less than one turn [1].

During the earnings call, the company's leadership acknowledged challenges in core nonresidential and residential end markets, as well as manufacturing costs impacted by fixed cost absorption on inventory produced over winter months [1]. Despite these headwinds, the company remains optimistic about its strategic investments and opportunities, with a focus on driving higher attach rates of Allied Products with Pipe and investing in Infiltrator for higher growth [1].

Barclays' upgrade reflects the company's strong performance and resilience in the face of market challenges. The Overweight rating suggests that Barclays believes Advanced Drainage Systems is well-positioned to outperform its peers and offers attractive investment potential.

References:
[1] https://www.gurufocus.com/news/3048556/advanced-drainage-systems-inc-wms-q1-2026-earnings-call-highlights-resilient-performance-amid-market-challenges
[2] https://ca.finance.yahoo.com/news/advanced-drainage-systems-inc-wms-072353706.html
[3] https://www.marketscreener.com/news/tranche-update-on-advanced-drainage-systems-inc-s-equity-buyback-plan-announced-on-february-3-202-ce7c5edfdf8ff42c