Advanced Drainage shares drop 15% after cutting 2027 sales forecast

Advanced Drainage Systems (WMS) cut its fiscal 2027 net sales forecast to $3.300 billion to $3.400 billion, from $3.350 billion to $3.550 billion, and narrowed its Adjusted EBITDA forecast.

Shares fell 14.8% at 3:59 p.m. ET, from a $144.07 close.

Second-quarter net sales rose 4.6%.

Here's how the company did:

• Net sales: $889.4 million vs. $850.4 million a year earlier
• Adjusted EPS: $1.88 vs. $1.97 a year earlier
• Diluted EPS from continuing operations: $1.77 vs. $1.99 a year earlier
• Adjusted EBITDA: $286.8 million vs. $287.5 million a year earlier

Gross profit rose 1.7% to $345.9 million, driven mainly by the NDS acquisition, with favorable price/cost more than offsetting unfavorable volume and transportation costs.

Fiscal 2027 outlook

Adjusted EBITDA is now $1.000 billion to $1.030 billion, from $1.0 billion to $1.050 billion in August.

Capital expenditures are still expected at about $200 million.

President and Chief Executive Officer Scott Barbour said, "The demand environment is softer today than when we initially issued guidance in May, driven by higher interest rates and ongoing geopolitical uncertainty."

Lower-than-expected material inflation removes the need for pricing actions built into its net sales outlook.

Segment results

Stormwater sales rose 6.2% to $712.1 million, including $77.3 million from National Diversified Sales (NDS). On an organic basis, Stormwater sales fell 5.3%.

Wastewater sales fell 1.3% to $177.3 million from $179.7 million.

An estimated $40 million to $50 million of revenue was pulled into the first quarter from the second, up from an earlier estimate of about $30 million.

Cash and capital returns

Net cash from operating activities was $458.2 million, compared with $509.8 million a year earlier. Free cash flow was $359.5 million, compared with $398.8 million.

In the six months, it repurchased 2.7 million shares for $375.1 million, with $677.3 million remaining under its authorization.

The board declared a dividend of 20 cents per share, up from 18 cents a year earlier.

Cash was $153.2 million and total liquidity $891.8 million. Net debt was $1,619.9 million, up $71.0 million from March 31.

It also proposed acquiring StormTrap Investments LLC for $530 million, with closing expected in calendar Q4 2026.