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Mercer Capital's Value Focus: Construction Industry | Q2 2015

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Mercer Capital’s Construction Industry newsletter is a quarterly publication providing perspective on valuation issues pertinent to the construction industry, including residential, commercial, civil, paving, concrete, and more. Each issue includes a segment focus, market overview, mergers and acquisitions review, and more.

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Mercer Capital's Value Focus: Construction Industry | Q2 2015

  1. 1. BUSINESS VALUATION & FINANCIAL ADVISORY SERVICES Construction Overview Construction National GDP 1 Construction National Unemployment 2 Value of Construction Put-in-Place 3 Sector Focus: Building Materials 4 Government Funding for Highways Government Consumption and Investment 5 Trade-Weighted Index 6 Yield on 10-Year Treasury 7 Industrial Production Index 8 Value of Utilities Construction 9 Sector Round-up Residential Construction 10 Roads, Bridges, and Highways 12 Nonresidential 13 Mergers and Acquisitions 14 Bellwether Stocks Industry Participants 16 About Mercer Capital 19 www.mercercapital.com VALUE FOCUS Second Quarter 2015 Construction Building Materials SEGMENT FOCUS Building Materials EXECUTIVE INDUSTRY TRENDS • MA activity increased due to proposed LafargeHolcim mega- merger • Put-in-place measures show strong quarterly and annual numbers for residential and nonresidential • The NAHB Indices show strong consumer confidence on the year, particularly this past quarter • The strengthening of the Dollar slowed as the 10-year yield spiked
  2. 2. © 2015 Mercer Capital // www.mercercapital.com 1 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 GDP rose 3.7% over the past 12 months, falling at the higher end of an ideal range of 2% to 4% annually. Over the past 10 years, construction has averaged 4.1% of national GDP, and it accounted for 3.9% of GDP this past quarter. These are signs the economy, including the construction industry, are healthy and returning to normal levels. Construction lagged behind the rest of the economy, particularly in the years following the decline of 2009, but has since steadily recovered, marked by a 9.8% year-over-year increase in Construction GDP.All of these figures are expected to continue to improve going forward. $0 $100 $200 $300 $400 $500 $600 $700 $800 -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% GDP($Billions) AnnualizedRealGrowthRate Quarterly Growth Average Quarterly Growth GDP(CurrentDollars) Source:Bureau ofEconomic Analysis -6% -4% -2% 0% 2% 4% 6% National Construction Construction Overview Construction National GDP Construction Gross Domestic Product % Change in GDP Source:Tradingeconomics.com | U.S. Bureau of Economic Analysis Construction GDP Period % Change Q-o-Q 1.8% Y-o-Y 9.8% National GDP Period % Change Q-o-Q 1.5% Y-o-Y 3.7%
  3. 3. © 2015 Mercer Capital // www.mercercapital.com 2 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 According to the Federal Reserve, a healthy economy typically has an unemployment rate between 4.5% and 6.0%.The current level of 5.3% is right in the middle and has decreased from 6.1% a year ago in a steady fashion. Construction is a cyclical and seasonal industry, so its unemployment rate is more volatile. The major contributing factor to the seasonal nature of the construction industry is the weather. Production of materials and projects in general decrease during the cold, winter months. The construction unemployment rate is currently 6.3%, down from 8.2% a year ago. This represents a generally positive trend for the industry. This number will likely continue to decrease coming out of the cold months and into the strongest parts of the calendar year, especially considering the unemployment rate was well above 10% in the middle of last quarter. Lower unemployment rates suggest an increase of activity within the industry. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% National Construction Source: U.S. Bureau of Labor Statistics Note: In the above graph, the national unemployment rate is seasonally adjusted, but theconstructionunemployment rate is not in order to showseasonality and recent trends. Construction Overview Construction National Unemployment Unemployment Rate
  4. 4. © 2015 Mercer Capital // www.mercercapital.com 3 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 The value of construction put-in-place is the total cost of construction on job sites during a particular period. The U.S. Census Bureau tracks this data and reports the total monthly. These costs include, but are not limited to, the building materials, labor, profit, engineering, interest, and taxes. Year-over-year put-in-place construction has surged, up 19.5% for residential and 8.6% for nonresidential. This past quarter shows a similar pattern with residential construction increasing by 4.8%, and nonresidential construction increasing by 7.4%. These strong numbers are likely due to warmer weather. While growth figures will likely decline in magnitude, they are expected to remain strong going forward. Higher levels of put-in-place construction suggest an increase of activity within the industry. Construction Overview Value of Construction Put-in-Place $0 $100 $200 $300 $400 $500 $600 $700 $800 $Billions Residential Nonresidential Source:U.S. Census Bureau Value of Construction Put-in-Place Residential Period % Change Q-o-Q 4.8% Y-o-Y 19.5% Nonresidential Period % Change Q-o-Q 7.4% Y-o-Y 8.6%
  5. 5. © 2015 Mercer Capital // www.mercercapital.com 4 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 This quarter was defined by historic levels of rainfall that hindered production and depressed volumes. Given the nature of the industry, it is important to remember building materials are sold to contractors with backlogs, performing construction projects that must eventually be completed, no matter how much rain falls. While quarterly gains were lower than expectations, inclement weather simply delays profits as roads still need to be repaired and homes still need to be built. Companies took advantage of down time to complete maintenance repairs on their fixed assets, which will increase production capacity to match pent-up demand. Congress has been working on a new bill to improve national infrastructure. State and local governments are typically in charge of their construction projects, but they rely on federal funding to complete many projects. This long-term bill would give not just funding, but security. Many states have kept big projects on the back-burner because they do not have a guarantee that their funding will last for the duration of the project. The increased likelihood of such a bill is a boon to the building materials industry, but state and local governments are also doing their part with increased investment in respective transportation departments. With demand postponed due to rain, volumes are expected to increase significantly. Volume increasing is typically a leading indicator for increasing price levels, so building materials companies can expect a boost in their margins.Material prices are frequently locked in for the duration of a project or on a yearly basis.With an expectation of price increases on the horizon, quoted prices will likely be higher than current levels, but lower than future increases, benefitting both sides. Expected increases in both residential and nonresidential construction will further help the building materials industry. Increased spending on infrastructure and industrial projects is a boost to nonresidential construction while population and employment growth help fuel residential construction. Diesel and gas prices for the quarter were lower than prior quarters and significantly lower than prices in the prior year. With such heavy products and freight costs being a large component of price, companies have accumulated significant savings on delivery. Lafarge and Holcim, two of the largest players in the industry, both domestically and globally, have announced divestitures of certain assets this quarter to avoid anti-trust regulation issues ahead of their looming merger. Eagle Materials, Continental Concrete Company, and ESSROC Cement Corp will all acquired some of these assets when the merger closes. US Concrete made a few acquisitions totaling 12 plants and 171 mixer trucks across Virginia, New York City, and northern New Jersey. Summit Materials continued their growth strategy with another acquisition costing $15.9 million. Sector Focus Building Materials
  6. 6. © 2015 Mercer Capital // www.mercercapital.com 5 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Building materials are a crucial input to construction projects. Without funding, however, construction projects cannot be completed. Much of this funding comes from public resources, so the industry must always be concerned with the level of government spending on construction activity. Government consumption expenditures and gross investments reached high levels during the recession to boost the economy and have declined significantly in the years following. Spending likely will not reach that level any time soon, though it has increased slowly in the past couple of years and is expected to continue in this direction. Government funding for highways is expected to increase significantly, as demonstrated in the below graph, despite a small decrease from the previous year. This is in large part due to the expected long-term congressional funding bill for highway repairs and construction. Building Materials Government Funding for Highways Government Consumption and Investment Government Funding for Highways Government Consumption and Investment $0 $50 $100 $150 $200 $250 $300 $Billions Source: IBIS World | Bureau of Economic Analysis $2,650 $2,700 $2,750 $2,800 $2,850 $2,900 $2,950 $3,000 $3,050 $3,100 $3,150 $Billions Source: St. Louis Fed| U.S. Bureau of Economic Analysis Government Funding for Highways Period % Change Y-o-Y -2.1% Government Consumption and Investment Period % Change Q-o-Q 0.6% Y-o-Y 0.7%
  7. 7. © 2015 Mercer Capital // www.mercercapital.com 6 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 The Trade-Weighted Index measures the relative strength of the U.S. dollar in comparison to foreign currencies, putting an emphasized weight on the most common trade partners and largest economies. When the dollar is strong, imports become cheaper and exports become more expensive. The dollar is near its strongest level in the last 10 years, which increases the cost for other countries to purchase U.S. building materials and decreases sales volume. It has declined slightly in the past quarter, signaling that the rapid growth of the past year may finally be slowing. 80 90 100 110 120 Source: St. Louis Fed | Board of Governors of the Federal Reserve (US) Building Materials Trade-Weighted Index Trade-Weighted Index Trade-Weighted Index Period % Change Q-o-Q -1.0% Y-o-Y 12.4%
  8. 8. © 2015 Mercer Capital // www.mercercapital.com 7 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 The yield on 10-Year Treasury Bonds acts as a proxy for how expensive it is to finance construction projects. Growth in the building materials industry could be adversely affected by the recent quarterly spike in interest rates. It should be noted, however, that flight to safety during gloomy macroeconomic times can depress yields. An increase in yields raises the cost of investment, but it can also signify increasing optimism, which leads to more spending in the construction industry. 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Source: St. Louis Fed| Board of Governors of theFederalReserve(US) Building Materials Yield on 10-Year Treasury Yield on 10-Year Treasury Yield on 10-Year Treasury Period % Change Q-o-Q 32 BPS Y-o-Y -24 BPS
  9. 9. © 2015 Mercer Capital // www.mercercapital.com 8 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 The Industrial Production Index is an indicator of economic activity that measures real production output of the manufacturing, mining, and utilities industries. It acts a barometer for the level of demand for industrial products and manufacturing activity. Building materials such as sand and gravel are important inputs of industrial production. IPI has been steadily increasing since 2009, but it has slowed in the past year, particularly in the past quarter.This could show a leveling off in demand for building materials, which would decrease industry revenue after years of slow, steady growth. 80 85 90 95 100 105 110 Source: St. Louis Fed | Board of Governors of the Federal Reserve (US) Building Materials Industrial Production Index Industrial Production Index Industrial Production Index Period % Change Q-o-Q -0.6% Y-o-Y -0.2%
  10. 10. © 2015 Mercer Capital // www.mercercapital.com 9 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Cement and ready-mix concrete are used in most construction projects involving the utilities subsector such as transportation, energy, gas, water, and sewage.There will always be a need for such infrastructure, so building materials companies can rely on this revenue stream even though the growth rate of new projects fluctuates. The value of utilities construction is expected to increase similar to non-residential construction levels as a whole, which should also increase demand for the industry. While it is significantly down for the past year, the value of utilities construction has increased in the past quarter. If this trend continues, building materials companies will experience increased demand. $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $Billions Source: US Census Bureau Building Materials Value of Utilities Construction Value of Utilities Construction Value of Utilities Construction Period % Change Q-o-Q 6.4% Y-o-Y -12.8%
  11. 11. © 2015 Mercer Capital // www.mercercapital.com 10 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 The National Association of Home Builders uses surveys to produce two indices on the confidence level within the homebuilding industry. For both surveys, respondents are asked to rate market conditions, with 50 being the index average. Both indices showed clear declines due to the housing crisis, but they have steadily increased and have been above 50 for the past year. HMI has spiked in the past quarter and undergone significant increases in the past year. RMI has grown much slower, but this growth is certainly a positive indicator. While there will likely be fluctuations going forward, it is a good sign as long as these indices are above average. 0 10 20 30 40 50 60 70 80 90 100 HMI RMI Note: RMI is measured quarterly and approximated for a monthly basis using a straight-line approach. Source: National Association of Home Builders Sector Round-up Residential Construction NAHB Housing Market and Remodeling Market Indices NAHB HMI Period % Change Q-o-Q 15.4% Y-o-Y 22.4% NAHB RMI Period % Change Q-o-Q 4.0% Y-o-Y 4.9%
  12. 12. © 2015 Mercer Capital // www.mercercapital.com 11 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Building permits and housing starts are two important indicators for the home building industry. Both reflect demand, consumer confidence, and the feasibility of financing such construction projects. Building permits can be issued and then shelved by builders; therefore, housing starts are a better focused measure of current activity within the industry. Housing permits and housing starts have felt the effect of the housing bubble with a steep drop of nearly 75% in three years from Q1 2006 to Q1 2009. Both of these have recovered somewhat as the economy has gotten back on track, but they are unlikely to reach prerecession highs, which were artificially high due to the housing bubble. As seen in the charts below, all levels of permits and starts have increased notably over the past year driven by a particularly strong quarter. Sector Round-up Residential Construction (continued) Seasonally Adjusted Annualized Rates of New Housing Starts and Building Permits Millions of Units Private Housing Starts Period % Change Q-o-Q 23.1% Y-o-Y 26.6% Single Family Starts Period % Change Q-o-Q 10.0% Y-o-Y 14.7% Private Building Permits Period % Change Q-o-Q 29.4% Y-o-Y 30.0% Single Family Building Permits Period % Change Q-o-Q 7.0% Y-o-Y 6.0% 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2 2.3 2.4 Private Housing Starts Single Family Starts Private Building Permits Single Family Building Permits Source: U.S. Census Bureau Note: Permits at a given date are generally a leading indicator of future starts. Beginning with January 2004, building permit data reflects the change to the 20,000 place series. Private Housing Single Family Housing
  13. 13. © 2015 Mercer Capital // www.mercercapital.com 12 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 The yield on 10-Year Treasury Bonds, as shownon page 7, can indirectly affect the road contracting industry. Higher interest rates make construction projects more expensive to undertake. When yields on the 10-Year Treasury are low and stable, the construction industry experiences increased investment and volume. When interest rates are high, it is more expensive for the public sector to finance industry projects such as road building. The 10-Year yield has significantly increased in the past quarter, despite an overall decrease in year-over-year yields. If the quarterly increase continues, the industry will face rising investment costs. However, if the yearly trend continues, demand will likely increase in the industry. Road contractors submit bids to local and state governments, and construction jobs are awarded to the lowest bidder. Higher input costs, like cement, decrease both the volume of projects the government is willing to start and the profit margins for contractors. The US Geological Survey determines the trend of cement prices, and its increase represents a negative sign for the industry. $0 $20 $40 $60 $80 $100 $120 $140 $perTon Sector Round-up Roads, Bridges, and Highways Price of Cement Price of Cement Period % Change Y-o-Y 5.0% Source: IBIS World | U.S. Geological Survey
  14. 14. © 2015 Mercer Capital // www.mercercapital.com 13 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Corporate profit is essential for companies not only to survive, but to grow and expand.When corporate profit increases, companies are more willing and able to open new branches and divisions. These additions lead to more commercial construction. According to the chart below, corporate profit has increased notably in the past year, driven by a strong quarter. If this growth continues, companies will be more likely to invest in nonresidential construction and, in turn, increase the demand for building materials. $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $Billions Source: St. Louis Federal Reserve Sector Round-up Nonresidential Corporate Profit Corporate Profit Period % Change Q-o-Q 6.3% Y-o-Y 8.5%
  15. 15. © 2015 Mercer Capital // www.mercercapital.com 14 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Announce Date Industry Subsector Target/Issuer Buyers/Investors Seller Description June 18 Building Materials Lewis and Lewis Inc. Summit Materials, Inc. Manufactures and supplies aggregate materials in WY. June 17 Building Materials Anchor Block Company and Anchor Wall Systems, Inc. Oldcastle Architectural, Inc. Designs, manufactures, and sells concrete land- scape and masonry products. June 14 Home Building Ryland Group Inc. CalAtlantic Group, Inc. SSGA Funds Management, Inc.; Impala Asset Management, LLC Homebuilder and mortgage-finance company based in CA that also sells land and lots. June 10 Home Building Bonterra Builders, LLC AV Homes, Inc. Designs and builds new homes in the Carolinas. June 1 Building Materials DuBROOK Concrete, Inc. U.S. Concrete, Inc. Manufactures and delivers ready-mixed concrete in north VA with 3 RMC plants and 42 mixer trucks. May 22 Building Materials Colonial Concrete Company, Inc. U.S. Concrete, Inc. Produces ready-mix and other concrete products in northeast NJ. May 12 Building Materials A Leading Cement Terminal in Puerto Rico Cementos Argos S.A. Putney Capital Management, LLC A reception, storage, and distribution terminal in PR. May 4 Building Materials Holcim (US) Inc., Slag Grinding Plant Eagle Materials Inc. Holcim (US) Inc. Divestiture of a slag grinding plant in South Chicago. Mergers and Acquisitions
  16. 16. © 2015 Mercer Capital // www.mercercapital.com 15 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Announce Date Industry Subsector Target/Issuer Buyers/Investors Seller Description May 4 Home Building Fairmont Homes, Inc. Cavco Industries, Inc. Provides manufactured and modular homes based in IN. May 1 Home Building JEH Homes, LLC Taylor Morrison Home Corporation Designs and builds homes based in Alpharetta, GA. April 29 Nonresidential Cornerstone Environmental Group, LLC Tetra Tech, Inc. Operates as an engineering and environmental consulting, and field services company with operations across the U.S. April 24 Home Building Pacific Ridge Homes DR Horton Inc. Homebuilder specializing in design and construction of new homes and communities in greater Seattle area. April 22 Building Materials Holcim Ltd., Cement Facilities in USA ESSROC Cement Corp. LafargeHolcim Ltd. Divestiture of cement facilities in U.S. April 17 Building Materials Lafarge North America Inc., Cement Assets Continental Cement Company, LLC Lafarge North America Inc. Divestiture of cement plants and distribution terminals in the US, while acquiring a distribution terminal in IA. April 2 Building Materials Ferrara Brothers Building Materials Corp. U.S. Concrete, Inc. Concrete manufacturer based in NY. Mergers and Acquisitions
  17. 17. © 2015 Mercer Capital // www.mercercapital.com 16 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Ticker Exchange Stock Price at 6/30/15 LTM Price Range Enterprise Value LTM LTM Margin EBITDA/ Rev. LTM Multiple Forward Multiples High Low Rev. EBITDA EV/Rev. EV/EBITDA EV/ EBITDA Residential Beazer Homes USA Inc. BZH NYSE $19.95 $21.33 $14.20 $1,954.03 $1,540.47 $43.49 3% 1.3x 34.1x 12.3x Comstock Holding Companies, Inc. CHCI Nasdaq 3.90 9.94 3.50 61.83 51.09 (0.15) 0% 1.2x 95.1x 0.0x DR Horton Inc. DHI NYSE 27.36 29.29 19.29 13,086.66 10,124.00 1,124.40 11% 1.4x 13.3x 10.7x Hovnanian Enterprises Inc. HOV NYSE 2.66 5.20 2.59 2,434.17 2,164.07 101.83 5% 1.1x 39.9x 19.4x KB Home KBH NYSE 16.60 18.98 11.76 3,906.00 2,588.35 148.99 6% 1.5x 26.6x 16.0x Lennar Corporation LEN NYSE 51.04 53.67 35.74 16,779.81 8,634.72 1,082.09 13% 1.9x 13.9x 12.2x LGI Homes, Inc. LGIH Nasdaq 19.78 22.21 12.21 583.96 480.45 59.42 12% 1.4x 11.2x 9.1x MDC Holdings Inc. MDC NYSE 29.97 31.23 23.67 2,104.49 1,785.71 100.93 6% 1.2x 20.8x 17.6x NVR, Inc. NVR NYSE 1,340.00 1,387.40 1,040.83 5,569.82 4,741.15 549.40 12% 1.2x 10.9x 10.2x PulteGroup, Inc. PHM NYSE 20.15 23.36 16.56 8,647.36 5,830.87 787.16 13% 1.4x 11.4x 9.3x Toll Brothers Inc. TOL NYSE 38.19 40.33 28.92 9,591.47 4,113.58 514.53 13% 2.3x 18.1x 14.9x Median $20.15 $23.36 $16.56 $3,906.00 $2,588.35 $148.99 11% 1.4x 18.1x 12.2x Average $142.69 $149.36 $109.93 $5,883.60 $3,823.13 $410.19 8% 1.5x 26.8x 12.0x All figures reported in millions, except per share data Source: Capital IQ Bellwether Stocks Industry Participants
  18. 18. © 2015 Mercer Capital // www.mercercapital.com 17 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Ticker Exchange Stock Price at 6/30/15 LTM Price Range Enterprise Value LTM LTM Margin EBITDA/ Rev. LTM Multiple Forward Multiples High Low Rev. EBITDA EV/Rev. EV/EBITDA EV/ EBITDA Building Materials Eagle Materials Inc. EXP NYSE $76.33 $105.69 $68.54 $4,350.63 $1,085.08 $312.60 29% 4.1x 12.5x 10.9x Martin Marietta Materials, Inc. MLM NYSE 141.51 155.98 103.09 11,164.73 3,179.60 707.78 22% 3.8x 17.1x 12.5x MDU Resources Group Inc. MDU NYSE 19.53 35.41 19.22 6,221.27 4,110.05 450.44 11% 1.3x 7.5x 8.8x Summit Materials, Inc. SUM NYSE 25.12 28.57 19.36 1,681.49 1,287.78 174.48 14% 1.3x 10.5x 6.6x US Concrete, Inc. USCR Nasdaq 37.89 40.93 21.48 818.17 793.13 83.62 11% 1.1x 10.2x 7.6x Vulcan Materials Company VMC NYSE 83.93 93.07 54.10 13,105.78 3,155.04 678.93 22% 4.3x 21.0x 15.7x Cemex SAB de CV (ADR) CX NYSE N/A N/A N/A N/A N/A N/A 19% 2.0x 11.2x 0.0x CRH PLC (ADR) CRH NYSE N/A N/A N/A N/A N/A N/A 9% 1.2x 13.9x 0.0x HeidelbergCement HEI GR N/A N/A N/A N/A N/A N/A 17% 1.6x 8.9x 8.0x LafargeHolcim Group LHN VTX N/A N/A N/A N/A N/A N/A 19% 1.8x 9.1x 9.0x Median $57.11 $67.00 $37.79 $5,285.95 $2,221.41 $381.52 18% 1.7x 10.8x 8.4x Average $64.05 $76.61 $47.63 $6,223.68 $2,268.45 $401.31 17% 2.3x 12.2x 7.9x Roads, Bridges, and Highways Granite Construction Inc. GVA NYSE $35.51 $39.09 $30.44 $1,279.14 $2,299.04 $115.29 5% 0.5x 9.5x 7.0x Sterling Construction Co STRL Nasdaq 4.00 10.01 2.23 106.33 637.99 (6.06) -1% 0.2x NM 26.2x Tutor Perini Corporation TPC NYSE 21.58 32.51 20.07 1,843.49 4,831.47 230.79 5% 0.4x 6.7x 6.5x Median $21.58 $32.51 $20.07 $1,279.14 $2,299.04 $115.29 5% 0.4x 8.1x 7.0x Average $20.36 $27.20 $17.58 $1,076.32 $2,589.50 $113.34 3% 0.4x 8.1x 13.2x All figures reported in millions, except per share data Source: Capital IQ Bellwether Stocks Industry Participants Note: CX, CRH, HEI, and LHN report in foreign currency. Margin and multiples unaffected and shown for analysis.
  19. 19. © 2015 Mercer Capital // www.mercercapital.com 18 Mercer Capital’s Value Focus: Construction Building Materials Second Quarter 2015 Ticker Exchange Stock Price at 6/30/15 LTM Price Range Enterprise Value LTM LTM Margin EBITDA/ Rev. LTM Multiple Forward Multiples High Low Rev. EBITDA EV/Rev. EV/EBITDA EV/ EBITDA Nonresidential Aecom Technology Corporation ACM NYSE $33.08 $38.24 $24.82 $9,407.81 $15,828.77 $863.16 5% 0.7x 11.9x 8.4x Chicago Bridge and Iron Company N.V. CBI NYSE 50.04 70.27 32.16 7,451.80 13,085.28 1,269.05 10% 0.6x 5.9x 5.7x Dycom Industries Inc. DY NYSE 58.85 60.82 24.84 2,429.93 1,925.90 222.27 12% 1.3x 10.9x 9.0x EMCOR Group Inc. EME NYSE 47.77 48.84 38.68 2,963.61 6,523.28 345.88 5% 0.5x 8.8x 8.0x Fluor Corporation FLR NYSE 53.01 79.20 51.80 7,022.67 20,254.03 1,348.13 7% 0.3x 5.0x 5.4x Jacobs Engineering Group Inc. JEC NYSE 40.62 55.00 37.87 5,278.96 12,216.32 783.54 6% 0.4x 6.6x 7.3x MasTech, Inc. MTZ NYSE 19.87 32.10 15.34 2,841.42 4,616.65 348.95 8% 0.6x 7.3x 6.4x Quanta Services, Inc. PWR NYSE 28.82 37.49 25.34 6,269.71 7,907.30 623.66 8% 0.8x 8.4x 7.1x Median $44.20 $51.92 $28.75 $5,774.33 $10,061.81 $703.60 7% 0.6x 7.8x 7.2x Average $41.51 $52.75 $31.36 $5,458.24 $10,294.69 $725.58 8% 0.6x 8.1x 7.2x All figures reported in millions, except per share data Source: Capital IQ Bellwether Stocks Industry Participants
  20. 20. Mercer Capital Construction Building Materials Industry Services Contact Us Copyright © 2015 Mercer Capital Management, Inc. All rights reserved. It is illegal under Federal law to reproduce this publication or any portion of its contents without the publisher’s permission. Media quotations with source attribution are encouraged. Reporters requesting additional information or editorial comment should contact Barbara Walters Price at 901.685.2120. Mercer Capital’s Industry Focus is published quarterly and does not constitute legal or financial consulting advice. It is offered as an information service to our clients and friends. Those interested in specific guidance for legal or accounting matters should seek competent professional advice. Inquiries to discuss specific valuation matters are welcomed. To add your name to our mailing list to receive this complimentary publication, visit our web site at www.mercercapital.com. Mercer Capital provides valuation and transaction advisory services to the construction and building materials industries. Industry Segments Mercer Capital serves construction industry segments from to commercial and civil to residential.We also serve the building materials sector from aluminum and steel to brick, glass, and lumber. Mercer Capital Experience • Family and management succession planning • Buy-side and sell-side transaction advisory assistance • Conflict resolution and litigation support • Trust and estate planning • Buy-sell agreement valuation, design, and funding advisory Contact a Mercer Capital professional to discuss your needs in confidence. Timothy R. Lee, ASA 901.322.9740 leet@mercercapital.com Nicholas J. Heinz 901.685.2120 heinzn@mercercapital.com MERCER CAPITAL Memphis 5100 Poplar Avenue, Suite 2600 Memphis, Tennessee 38137 901.685.2120 Dallas 12201 Merit Drive, Suite 480 Dallas, Texas 75251 214.468.8400 Nashville 102 Woodmont Blvd., Suite 231 Nashville, Tennessee 37205 615.345.0350 www.mercercapital.com BUSINESS VALUATION FINANCIAL ADVISORY SERVICES

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